What Are Some Things I Can Do To Avoid Foreclosure?
You are in financial trouble and several months in
arrears with your mortgage. You do not want to lose your
property, your home so what do you do to avoid foreclosure?
Well first of all foreclosure is a legal action. No company,
however large can take your house without going through the
correct legal procedure. This takes time and there is plenty of
time and opportunities for you to save your home from
foreclosure. So first of all you will probably need some legal
advice. This can be from a lawyer or from a charity or company
that specialises in this kind of work.
In Canada the foreclosure procedure varies from one province to
another but there are two major foreclosure methods:
1. Judicial Sale Method: the lender sells the mortgaged property
by obtaining court permission. The sale is undertaken under the
authority and supervision of the court.
2. Power of Sale Method: The lender is able to sell the property
without involving the court as they have the right to sell
within the mortgage document. Some provinces provide legislation
which authorizes the power or sale. The borrower is provided
with prior notice that foreclosure is going to happen.
Whichever foreclosure method is used, you are going to have a
ruined financial history, a great deal of stress and anxiety and
probably have your house sold very quickly for a lower price
than you would anticipate. However you look at it foreclosure is
devastating to your life, your family and your financial future
so what are the things that you can do to
avoid foreclosure?
1. Contact your lender immediately that you have any kind of
financial problems that may mean you cannot pay your mortgage.
Foreclosure is expensive and time consuming to the lender and
they often will help you with suggestions and assistance in
rearranging your payment requirements. Never ignore any
correspondence that you receive from your lender. This will only
increase the progress of any foreclosure activities.
2. Seek legal assistance immediately you are in trouble. Many
mortgage companies in Canada will not start foreclosure
activities until you are at least three months in arrears.
3. Keep a record of all your payments and correspondence and
verbal communications with your lender. Things get muddled
sometimes so this will assist you with your case.
4. Discuss alternative payment options with your lender. They
may be willing to accept lesser payments for a short while,
whilst you sort out your financial affairs.
5. If you have missed a few payments ask for these arrears and
late fees to be pro-rated and added to your regular payments for
a few months. Sometimes lenders will allow you to pay extra for
up to a year as long as you keep up these new increased payments
and they can see the arrears decreasing.
6. Consider investing some money into your house and improving
it ready for a sale. If you sell your house privately you are
likely to achieve a higher sale price than if it is foreclosed.
If you spend a little money fixing the house up, you may even
come out of the whole process with a profit after you have paid
off your mortgage debts and selling costs.
7. Consider forbearance, where the lender agrees to suspend
payment for an agreed time period. At the end of this period you
either pay the full arrears in one payment or in fixed interim
payments.
8. If you are unlikely to be able to clear your mortgage and
arrears with the sale of your house, you may be able to agree a
short sale with your mortgage lender. This option means that you
sell the house and repay the lender with the proceeds. The
lender then agrees to excuse any short difference between the
sale proceeds and the mortgage loan balance. This short sale
option may mean that you do not have to pay foreclosure fees and
are excused having a foreclosure record on your financial
records. In some provinces you may have to pay tax on the debt
that you have been excused so take this into consideration.
Foreclosure is a very stressful and expensive process to go
through and you should do everything possible to avoid it. So
take legal advice and keep your lender informed at all times.
Your best foreclosure avoidance option is to do up your house
and try and sell it yourself as quickly as possible.
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