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Affiliated Attorneys, LLC Blog

Friday, September 6, 2019

5 Possible Alternatives to Foreclosure

Being delinquent on your mortgage is a scary time. You’re faced with potentially losing your home at a time when you need stability. If you’re behind on your mortgage payments, there are several options available to avoid foreclosure and protect your future.

      1. Sell the property

        If you have equity in the home, you can simply put the home up for sale. If you are behind on mortgage payments and owe less on the home than it is worth, you can sell the home, repay the loan in full, and keep the difference to help rebalance your finances.

      2. Rent the property

        Depending on your mortgage payments, you may be able to rent the home. In a situation where the rental income covers the mortgage payment and you have an alternative place to live, you can avoid foreclosure by continuing to pay the mortgage via the rental income. Similarly, you can always rent out a room or area of your home to help supplement your income while remaining in the home to help pay the mortgage payment.

      3. Negotiating a workout agreement with your lender

        In most situations, the lender does not want to foreclose. The costs of foreclosure are high when factoring in legal fees and potential complications due to state law. For many lenders, they are likely to find themselves in a situation where they are losing money by attempting to foreclosure and then sell. Rather than foreclose, some banks will consider workout agreements. A workout agreement is a mutual agreement between the debtor and lender establishing new covenants and repayment terms. For many individuals who are behind on their mortgage payments, a simple call to your lender or mortgage servicer can provide the relief that you need.

      4. Short sale

        If you owe more on the home than it’s worth, the lender may agree to a short sell. A short sell is a sale of the property for less than the value of the mortgage. While the bank loses money on the difference in sale price and outstanding mortgage, it may still agree as this could be less costly to them than foreclosing.

      5. Deed in lieu of foreclosure

        As noted above, foreclosure can be a costly endeavor for a lender. Rather than spend the money on the legal fees of a foreclosure, the lender may be willing to accept a deed in lieu of foreclosure. A deed in lieu of foreclosure is a transfer of the property from the debtor to the lender to satisfy the outstanding debt. The process can reduce the stress of foreclosure on both parties, and will result in the lender discharging any outstanding debt secured by the property.

There are many alternatives to foreclosure. Here, we have identified five of the most common methods.


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