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What is foreclosure?
Foreclosure is the process of a bank regarding ownership of a home that the owner cannot afford the mortgage payment on. A mortgage is, in essence, a loan given to help the buyer purchase a house, on the assumption that it be paid back regularly over a fixed period. When you can no longer afford to make payments, the bank can retake ownership of the house to recoup their loss. In the process, you will be evicted and may find yourself in substantial debt. Some times the bank taking the house is enough for them to call it quits, occasionally though they will seek further compensation from you in the form of your other assets. Stocks, other properties, valuables such as a car or a boat. If those items are financed through the bank, they will have the right to foreclose on them too.
Why is foreclosure such a problem?
The problem for most people is the suddenness with which everything shifts. Once the bank decides they need to foreclose on you, they will very quickly kick you out and start to try and sell the home or find a tenant capable of paying. You will be given very little time to gather your belongings and move out, think about how much preparation goes into moving house. Now imagine you are only given 2 weeks’ notice, and, no landlord in their right mind would lease to you given you just got foreclosed on. This can lead to a huge snowball effect, of worsening financial situations. If you can avoid being foreclosed on, you will want to do so. Anyway possible.
Is having my home foreclosed going to affect me in the long run?
Foreclosure leads to a lot of knock-on effects that become worse over time. For example, imagine your credit score has just dropped. You could go to a different bank and attempt to get a mortgage but they will see you as a risky investment and decline you a loan. So you are left trying to rent, except landlords, won’t want a tenant that isn’t a reliable source of income. Which usually ends up with you living somewhere and paying more than you should as a way of the landlord hedging their bets, or paying for expensive holiday properties. Additionally, you may struggle to apply for all sorts of loans that you might need to get by. Your cell phone contract, your wifi, a car, school, all of these loans will be hard to secure after a foreclosure. If you do manage to secure them, they will be at a steep interest rate. Which, ultimately, ends up with you being further in debt.
Can you stop foreclosure once it has started?
Yes, you absolutely can stop a foreclosure once it has started. First of all, you can apply for a delay from the bank. They may be willing to give you a little breathing room if you have been a good customer for many years. Or, you can try and find a company willing to help you out, like our partners. Some businesses operate by paying off people’s loans for them and taking ownership of the house. In return, the homeowner agrees to continue living there as a rental tenant. This is a great end scenario for everyone involved. The company gets a solid investment property, the bank has its loan paid off, and the homeowner keeps a roof over their head and doesn’t have their credit destroyed.
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How can I ensure I don’t get foreclosed on in the future?
The only way to ensure you never get foreclosed on is by paying your mortgage payments on time and in full. It is sometimes possible to refinance your mortgage so you are paying less per week/month but more in the long run. This is good for you, as you can now afford the payments. It’s good for the bank because they get more money from you overall. The problem lies in the value of the house. If you buy a house for $250k, you may end up paying $325k when everything is said and done thanks to interest. If you keep refinancing the loan, you may end up paying twice the value of the house. It is a good solution if there is nothing else, but it can ultimately just make things worse down the line.
How long does it take to recover from a foreclosure?
It can take you several years to fully recover from being foreclosed on. That is one of the biggest reasons it is advised to seek out the help of someone who will assume your debt in return for the house. They can stop your financial situation from deteriorating into an absolute mess in just a matter of years. You can even buy back your house later at an adjusted rate if you felt so inclined.
As you can see, having your home foreclosed can be devastating. That being said, there are some things you can do to stop it. So long as you are proactive, and willing to seek help, then you can help keep your home from being taken away from you. You may lose the title of the owner, but your house will still be yours to live in. These companies help tens of thousands of people every year in situations the same as yours, so they know exactly how they can help make this process as pain-free for you as possible. Good luck and don’t be afraid to book a free consultation.