Way Behind On Your Mortgage? Here Are Two Ways To Get Out
Posted on: 15 December 2016
Nobody takes out a mortgage with the intention of falling months behind on payments. But life happens, and things like putting food on the table and buying medication have to take precedent over making your mortgage payment. If you're months behind and just want to get out of the house to leave this chapter of your life behind, here's a look at your options.
Let the bank foreclose.
If you choose to do nothing and just keep missing payments, you'll eventually get a letter in the mail from your mortgage lender stating that foreclosure proceedings are beginning. This sounds much scarier than it actually is. Thousands upon thousands of Americans have had their homes enter foreclosure, and while it will ruin your credit score for a while, you can recover.
When you receive that first letter from the bank, it will actually be a notice of pre-foreclosure. This is a period that lasts a few months (your letter will specify how long), during which you can take another action to avoid foreclosure. Usually, this is done via a short-sale, which is discussed below.
If you choose not to take action and just let the bank foreclose on your home, you'll get a notice of auction. This notice will tell you what date the bank will auction off your home to the highest bidder. Once the auction is complete, you'll officially no longer be the owner of the home. Your debt will be erased, but you'll probably lose most of the equity in your home to foreclosure fees.
Arrange a short-sale.
If you do not want to have a foreclosure on your credit history, your other option is to arrange for the short-sale of the home after you get your pre-foreclosure notice in the mail. A short-sale is when you sell the home for less than the amount you owe on the mortgage. For instance, if you owe $150,000, you might sell the home for $120,000. The proceeds of the sale go to the lender. Though the lender makes less on a short-sale, it allows them to avoid the long and costly process of foreclosure.
If you are interested in a short-sale, you'll need to first find a real estate agent who specializes in this type of sale. He or she can then help you contact your lender and ask permission to do a short-sale. (This can only be arranged with your bank's permission.) Next, you and your realtor will find a buyer for the home. This is generally quite easy, since you'll be selling the home for less than what it's worth in order to get out from under it quickly.
If you are way behind on your mortgage and just want to get out, you do have options. Talk to a real estate agent or attorney to learn more.
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