Early Steps For Preventing Foreclosure

In today’s troubled times, foreclosure is becoming more and more common. Unfortunately, a lot of people choose to bury their heads in the sand when they can’t make their mortgage payments and they only end up making things worse for themselves. If you are having hard times and you know that you won’t be able to make your mortgage, there are a few things you can do to get the bank to put off starting foreclosure proceedings on your home.

The first thing you want to do is stop them from filing a notice of default. The notice of default is the first step in the foreclosure process and lenders will file this when they don’t receive a certain number of mortgage payments.

You will get warning letters in the mail, but what you want to do is get in touch with your bank before they even send out the first letter. This will establish a good intent and will make the bank much more receptive to working with you. But before you go to the bank, you need to have some kind of a plan where you can get back on track which will be appealing to both you and the bank.

If you have fallen behind, but have money coming on the horizon either through a job or some other type of loan or the sale of another property or investment, let your bank know that you will soon be able to pick up payments and make up the difference. Between the two of you, you can work out a plan where you become current on your payments and will be able to resume as normal without the threat of foreclosure.

In some cases, the lender might waive a payment. This is when the bank simply lets you miss one payment and would be a good option if you are currently in between jobs but are starting another one so you know you will be able to pick up your payments again the next month. Admittedly, lenders are not too keen on doing this but you might luck out so you might as well try it if you think will work for you.

In some cases, you might get the lender to be able to change the terms of your loan to a smaller monthly payment that you actually can afford. Perhaps you’ve had a pay cut or your spouse has lost their job? Then this might be a good option. In this case the lender might freeze the interest rate or recalculate the loan adding on a few years at the end so that your payments are smaller.

In some cases, particularly if you have equity in the home and can show proof of employment, you might be able to get the lender to refinance the loan into a payment schedule that is more in line with your current income.

In order to make up for missed payments, you might be able to get them added onto the end of your loan or, the bank might agree to give you a separate loan for the total amount of the missed payments. Of course, if you can’t afford your mortgage now, than making this other loan - called a partial claim - is of little interest to the bank since they know you will not be able to pay back.

These strategies can be effective for people who have had a temporary reduction in income but will see more money in the near future either from a new job or the sale of something significant. However, if you aren’t going to be increasing your income to the amount you need to pay your mortgage in the near future you will need to try some other tactics to avoid foreclosure.