Every homeowner dreads hearing the word foreclosure being mentioned. Foreclosure happens when you are unable to pay your mortgage loan, forcing the lender to take the home in an attempt to recover the money that you had borrowed. Most people actually buy their homes through mortgages because it’s much convenient and easier than waiting until after personal savings are enough to buy a house. In fact, every homeowner intends to continue paying his mortgage loan until the debt is cleared.
However, unfair circumstances such as illness, divorce and retrenchment make it difficult for one to continue paying such a loan. There are some homeowners that voluntarily press for home foreclosure in advance because they feel it’s more dignified than waiting until the bank officials come knocking at their door. Most people jump into foreclosure without knowing what they are getting themselves into. Below are some important things that you should know before foreclosing on your home.
- It Can be Deferred
Home foreclosure usually happens after you have failed to make monthly payments for several months in a row. There are banks that issue foreclosure notice after three months while others take up to six months. If you approach the bank managers and inform them about your financial dilemma, they might delay the process of foreclosing on your home. They do this in an attempt to buy time and see whether you will be able to continue making monthly contribution as initially agreed. You don’t therefore need to panic when the bank issues you with a foreclosure notice because you can act fast and protect your home.
- Banks Try to Avoid Home Foreclosure
Most people will tell you that the bank and other lenders are happy when you are not able to pay your mortgage loan because they can still sell it and make profit. Contrary to common belief, banks and other financial institutions don’t like foreclosing on homes. This is because they know they may not be able to get the profit margin that was initially targeted. In most cases, the lenders regard foreclosure of a home as loss because the house might have to be sold at a throw away price. That’s why they are always willing to postpone the foreclosure process until you have exhausted all the options.
- Properties on Foreclosure are not Sold Fast
Properties that are listed on the market as foreclosure take a while before they are bought. This is because most home buyers factor into the cost of repairing it and conclude that it’s better to invest in a new home. Besides that, the paperwork involved can be a daunting task. If you therefore succeed in getting the amount that you were unable to pay plus the interest or penalty, you can always get your home back.
- You can Sell the House in Advance
If you feel that your financial problems are not ending in the near future, you can opt to sell the home on your own and get loan foreclosure. This means that you will pay the loan in one transaction. But before you sell the property, you must first get an approval from the lender. If the lender rejects your idea, then you have to dance to his tune.
- Loan can be Restructured
When you get slapped with a foreclosure notice, you should be ready to defend your home. Taking it while lying down is not an option. You must put up a fight. For a start, you can take the matter to the court. The court can actually compel the lender to restructure the loan for you. If you are lucky, the principle amount will be slashed by a certain percentage to make it easy for you to clear the debt.