In the wake of the subprime lending crash, many people are worried about their own home loans. In most cases, those with worries are people who are dreading the reset of adjustable rate mortgages (ARMs), option ARMs, interest only loans and other mortgages with introductory rates and payments. One of the questions I have received multiple times in the last few weeks is this:
Is foreclosure my only option ?
The good news is this: Foreclosure may not be your only option. If you are in a good place with your credit score and with the equity in your home, you could refinance to a fixed rate. Your monthly mortgage payment will still go up, but it probably won’t be as dramatic as a reset.
And even if you can’t refinance, there are other options beyond foreclosure. But you need to plan ahead in order to prepare for the higher payments. If you start planning now, setting aside money and adjusting your budget to account for the higher payment rate, you might be able to avoid foreclosure. Lynette DeNike offers some good advice when it comes to avoiding foreclosure:
- Meet with your lender ahead of time, and try to work something out. You will need five or six months of lead time. Also realize that even if your lender isn’t willing to help you, you will at least of warning and can begin to prepare other options.
- Find ways to cut other expenses so you can make your mortgage payments.
- Consider renting your house.
- Sell the house (you will have to put it on the market ahead of time).
- Consider a deed in lieu of foreclosure, in which you sign your house over to the lender, and the lender cancels the debt (but you usually have to try to sell first).