Did you know that your bank wants you to avoid foreclosure as much as you do? While some banks have a friendlier face than others, their bottom line is a financial one, and foreclosure affects them hard, just like it affects you.
In fact, many banks aren’t waiting until you default on your mortgage to offer help. They’re hiring additional loan counselors to work with you to avoid foreclosure. Additionally, eligible borrowers who work in good faith with the bank to stay in their home will find options available to do so. And, the earlier you act, the more options you will have.
Fix Your Adjustable Rate
While it may have sounded like a great idea when you signed your mortgage, but once an ARM adjusts upward, it can have significant affect on your personal finances. An increase of even half a percent in interest can mean that you’re paying $300 or more dollars per month. If you’re struggling, call your bank immediately and ask to refinance into a fixed rate mortgage.
Ask to Extend Your Loan Term
Additionally, there are many reasons to keep a 10- or 15-year mortgage. The perks of paying off your home in such a short time are numerous, especially the money you will save in the long run on interest. But when times are tough, that option may hurt you in the short run. Talk to your lender about refinancing. If you’re sitting on a 15-year loan, refinancing into a standard 30-year mortgage can cut your monthly payment almost in half. You can easily avoid foreclosure with that kind of monthly savings.
Request a Temporary Forbearance
Forbearance allows a borrower to reduce or skip mortgage payments for a short period of time to help them get back on their feet and avoid foreclosure. The specific length of forbearance depends on the lender. Typically, the bank will waive mortgage payments during the forbearance period and allow the borrower to resume full payments after, with a plan to pay the lender back for the missed payments and bring the loan current.
Offer a Repayment Plan
If you’ve missed mortgage payments because of a temporary hardship and are ready to resume your mortgage payments, a repayment plan can help you avoid foreclosure. Moreover, a repayment plan allows you to spread the delinquent payment amount out over a specific agreed-upon period of time. During the repayment period, the bank recalculates the monthly loan amount, adding in a portion of the overdue amount until the loan is current. This option allows you to pay your delinquency over a period of time and preserve your mortgage.
The Bottom Line
Don’t stress. Sometimes hard times hit us all. Just remember that banks want to help you to avoid foreclosure and are ready and willing to help you. Visit NOLO’s foreclosure page for more options to avoid foreclosure.