Is Foreclosure Preventable? Read Our Top Points to Help

None of us like to consider the financial difficulties that can occur to a homeowner when mortgage repayments become difficult especially over a long period. But is foreclosure preventable in every case where a mortgage payer experiences financial difficulties? Read on to learn some of our top points which may help you in preventing foreclosure or managing your way out of financial debt.

Is Foreclosure Preventable?

Photo by @rodeutsch

When mounting money problems seem never-ending, and you struggle to make mortgage payments, the threat of foreclosure isn’t far behind. It’s a scary time for families that put all their savings and hard work into creating a home.

No one wants to have their beloved property stripped away from them. So, is foreclosure always inevitable in this situation? What can you do to avoid it?

Is Foreclosure Inevitable?

The short answer here is no. The stress and severity of the situation can make it feel as though foreclosure and the loss of the house are inevitable. However, this isn’t necessarily the case. There are financial options – some straightforward and some more drastic – that could help. There are also plenty of advisors and resources to turn to.

There can come a point where the situation is irreversible, and foreclosure is the only way forward. It is important to understand when it is too late to stop foreclosure and the necessary steps from then on.

Even so, lenders will work with property owners to make foreclosure preventable as best they can. The more effort you put into preventing foreclosure early on, the better your chances. It all starts with the right attitude and a proactive approach.

A Proactive Approach To Avoiding Foreclosure

It is far too easy to put bills and final notices to one side and wait. You think that sooner or later, you’ll find a solution to your cash flow issues and pay off the debt. If you don’t draw attention to the problem, it won’t hit as hard later on. This isn’t the case and doesn’t make foreclosure preventable, far from it.

Instead, it is much better to be open with lenders and mortgage companies now to create an easy path away from foreclosure.

Those lenders are probably going to be more compassionate and flexible than you think. If you show them you are willing to work on a solution and accept the state you’re in, you can create a plan of action.

Take action – Don’t hide

So, instead of hiding the letters and payment notices, act on them to stay in control. Read them carefully to see exactly where you stand and make an appointment to deal with the issue in person. It’s scary and maybe even a bit embarrassing, but you’re far from the first person in that situation.

3 Financial Options When Facing Foreclosure

1) Refinancing

When you set up that appointment with your lender to tackle the situation, you may be able to create a new payment plan. This could be as simple as a modification for the next few months to help you catch up. Or, it could involve a modification of the loan for long-term changes.

There are also refinancing more drastic options. Short refinancing lets lenders forgive aspects of the debt to create a new plan. This isn’t as likely as the other payment plans. An alternative is getting a second loan from another lender to get you out of trouble, but this is risky.

2) Selling the home

It’s understandable if you dismiss this idea at first. You’re trying to avoid foreclosure to keep your home and protect your assets. However, if you’re at a point where foreclosure is imminent, this might give you some control over your next move.

You can apply for a short sale, where you sell the property for less than the loan amount and give the proceeds to the lender. This will clear your debt, and the outcome depends on who you sell the house to.

3) Bankruptcy

This is the last resort option that no one wants to take. Yet, it might be the wisest move if there are no other options available. Bankruptcy has serious repercussions for your credit score and financial health.

However, it can create an automatic stay. This protects those filing for bankruptcy against those pursuing collections. Therefore, the bank can’t foreclose on the home, and there may be protection from other debt collectors too. You’ll need to talk this one over with family and lawyers before making a decision.

Talk To The Right People

Whatever route you take to avoid foreclosure and get your finances back on track, you need the right support system if you are hoping to make foreclosure preventable. As mentioned before, you need a strong connection with your lender from the start.

You have to show you are open to solutions and get on the same page with them. At the same time, you need to make sure your family and partner/spouse are on that page too. Hiding the situation from them isn’t going to help anyone. Get their feedback on the best approach and their support on new payment plans.

Consider taking legal advice

You might also want to meet with a lawyer if you are running out of options and bankruptcy is a possibility. This legal advice can help you get everything in order and set up for the next chapter.

Also, don’t forget that in the US there is the U.S. Department of Housing and Urban Development – HUD for short. They have a housing counselor locator app and skilled advisors nearby. They can help work with mortgage companies and find solutions to avoid foreclosure.

Just remember to watch out for scammers. Companies that get your details and know you’re in a vulnerable position may take advantage. They can ask for bank details and fees to help you get back on your feet. Only work with legitimate companies and your current lender.

cottage in the woods with the lights on — Work with your advisors to make foreclosure preventable so you can keep your home

Photo by Cameron Stewart

So Is Foreclosure Preventable? In Summary …

The main takeaway here is that there are steps you can take to minimize the risk of foreclosure when you struggle with mortgage payments. However, do not assume that foreclosure is preventable. The crucial factor is to stay positive and proactive when discussing payment and refinancing plans with lenders.

Work with them, not against them, to buy time and cover the debt. If that’s not possible, there are other options with house sales and bankruptcy declarations. There are times when foreclosure becomes unavoidable because the debt is too high and options are limited.

However, don’t assume this will happen to you without discussing your case first. You may be able to work your way out of debt and so ensure that foreclosure preventable but you need to work on the situation as early as possible.

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