Options For Those Who Cannot Afford Their Mortgage
As Columbus foreclosure defense lawyers, we are well-versed with providing clients with options when they can no longer afford their mortgages any longer. There is no question that when hard times hit, keeping up with your mortgage payments can be a challenge, especially if other financial burdens – such as medical bills and debt – are also involved.
However, it is important to note that your attorney can discuss different options with you, some of which we discuss below:
Refinancing is taking out a new mortgage loan at a lower rate and using those new loan funds to pay off your current mortgage. When you refinance, you go through the same steps that you did when you applied for your original loan. The mortgage lender then evaluates your credit, debt, and income, and if your application is approved, you will then sign the loan documents.
Because mortgage rates change frequently, it is possible that refinancing could lower your payments. However, even if your payment decreases when you refinance at a lower rate, you may end up paying more overall, as you are starting from scratch on a new loan (which means more interest over the long time), and you have to pay for application, appraisal, and origination fees, as well as for the insurance and title search.
If mortgage refinancing is the option for you, it is critical that you pursue this process before you fall behind on payments.
Mortgage Loan Modification
Modifying your mortgage loan changes the terms in order to make the payments more affordable. A number of lenders have their own programs, so it is important to look into your options with the assistance of a mortgage loan modification attorney.
In some cases, declaring bankruptcy can mean saving your home from foreclosure, especially if it is pursued earlier rather than later. Filing for Chapter 13 bankruptcy can stop foreclosure in its tracks, as creditors and other lenders are officially prohibited from engaging in collection actions (including foreclosing on a house) unless they petition the court for permission. Although declaring bankruptcy will negatively affect your credit for some years, it is possible to qualify for prime credit mortgage financing again in as little as two years.
A short sale occurs when a homeowner sells their home for less than they owe on the mortgage. It is a foreclosure alternative for homeowners who owe more than their home is worth and who are experiencing hardships. While the lender keeps the proceeds from the sale, sometimes a homeowner can receive some relocation assistance.
For some, this is a better option than foreclosure if they aren’t too far behind on payments – plus it is better for one’s credit. It is also important to note, however, that there is a chance that you will be responsible for the deficient funds (i.e. the difference between the amount owed and the final sales price).
Deed in Lieu of Foreclosure
This option allows you to turn your deed over to your lender instead of the lender foreclosing on your home. The lender then agrees to accept the deed as payment. With this option, you can sometimes benefit from turning over the deed if you have equity in your home. You also have some say over timing for the process.
A reverse mortgage allows homeowners age 62 and older to receive monthly payments against their home equity. As long as you continue to live in your home, these amounts do not have to be paid back. However, requirements that come with a reverse mortgage include paying insurance and property taxes, maintaining your home, and paying closing costs when the loan goes to settlement. This could impact your equity in the home and what you leave to your heirs.
Selling the Home
You also have the option of selling your home for what you owe on the mortgage. This can be a smart option if it is clear that you cannot hold onto your home and delaying the sale digs into your equity. Waiting until you fall behind on your mortgage can also affect how the home is listed for sale.
You also have the option of renting your home for at least enough – or more – to cover your mortgage payments. While maintaining a home is never inexpensive, there are a number of tax-deductible benefits, such as depreciation, mortgage interest, operating expenses, property tax, and repair costs.
Filing a Partial Claim
If you have missed a certain number of payments on an FHA-backed mortgage loan due to a temporary financial setback, you have the option of working with an attorney to file a partial claim. This is a loan that is paid directly to the lender and results in a lien against the property that is released once that the claim is repaid.
Note that there are also a number of COVID-19 Recovery Options provided by the FHA for borrowers facing default.
Contact Our Columbus & Dayton, Ohio Foreclosure Defense Attorneys to Discuss Options
With all of these options, the key is to act sooner rather than later in order to preserve your options and avoid certain fees and other burdens. At Kohl & Cook Law Firm, our foreclosure defense and avoidance and mortgage loan modification attorneys are here to help. Contact us today to schedule a free consultation and find out more.