The following eight are things that you need to consider before listing your home for sale if you are delinquent on your mortgage payment. The list is from a Prudential Northwest Properties’ disclosure. There are some serious ramifications to some of the options which is why “you may need the assistance of an attorney” shows up so often.
- Reinstatement: Bring the loan current. This is recommended if your financial hardship was temporary. You will have to pay all missed payments, late fees, and legal fees that are due.
- Forbearance: In the event that you cannot entirely pay your deficiency, you may be able to either negotiate a repayment plan with your lender, or add the balance to your principal. You may need the assistance of an attorney.
- Refinance: If you have sufficient equity and income, and you still have healthy credit, you may consider refinancing.
- Loan Modification: Some lenders may be willing to modify your loan by either lowering your interest rate or principal to keep your payments affordable. You may need the assistance of an attorney.
- Rent the property: If your mortgage payments, Insurance, taxes, and other housing fees are less than what you could rent your property for, this is your last option to keep your home without having to sell it or lose it in a foreclosure.
- Sell the Property: If you have sufficient equity, but your payments are higher than what you can afford, selling your property is certainly an option.
- Short Sale: If you owe more than what your property is worth, and none of the above options apply to your situation, then this may be the best option available to you. There are many, make sure that you understand them. You may need the assistance of an attorney.
- Deed in Lieu of Foreclosure: In effect, this is very similar to a’ short sale, but you will need the assistance of an attorney. Although, it does become complicated when there Is more than one lender Involved. Your lender may be more likely to approve a short sale than a deed in lieu because a deed in lieu places the property in their possession, whereas a short sale will get the property off of their books.
Not only is it important to discuss issues with your attorney, it is also necessary to discuss your financial situation or changes in your finances during a listing with your Realtor. It may be an uncomfortable conversation but what might appear to be the best course of action may change and the process may change which could impact the sale.
Good post, Charles. It’s important for home owners to know their options. As per a report released last week, mortgage delinquency is down as more defaults are being ‘cured’ and lenders have more incentives to work in resolving issues before heading the foreclosure route.