Foreclosure incidences in the U.S. have dropped to a 13-year low last 2018, about 78% lower than a record high of 2.9 million in 2010. But despite the drop in foreclosures in recent years, it is possible to lose your home due to unexpected occurrences, such as accidents or unemployment. Phoenix is one of the cities in Arizona, with foreclosure rates below the national average. But if you have a home loan that is at risk of being unpaid, here are the things that you can do to save your home:
1. Refinance your home
Mortgage refinancing is a standard option for homeowners who are struggling to pay their current mortgage. In refinancing, you are taking out a new loan with a different lender and using it to pay off your existing mortgage. People do this to get a home loan in Phoenix with lower monthly payments and possibly lower interest rates. However, it can stretch out your repayment term, leading you to pay more in total than your previous loan.
Moreover, refinancing comes with closing costs. Before you decide to refinance, check if you have enough cash to cover the expenses. If not, you can roll the closing costs into monthly payments, but this can end up costing you more.
2. Contact your mortgage lender
When you start receiving foreclosure notices, don’t ignore the problem. Contact your mortgage lender immediately and explain why you are missing monthly payments. Most lenders prefer to help homeowners keep their houses instead of letting them foreclose, so don’t be ashamed to reach out to them.
While speaking with your lender, you can also apply for a loan modification. In this way, you can modify the terms of payment either temporarily or permanently.
3. Declare bankruptcy
If you have debts that you cannot pay other than your mortgage, it might be a smart move to declare bankruptcy. Declaring bankruptcy has its consequences; you can tank your credit score, hurt career options, decrease your chances of borrowing in the future, and even increase existing interest rates for insurance. However, when you have no choice, declaring bankruptcy can help you save your house.
There are two types of bankruptcy; Chapter 7 and Chapter 13. In Chapter 7 bankruptcy, an appointed trustee liquidates your assets and uses the funds to pay off your debts. You have the option to exempt certain assets to help you get a fresh start (e.g., keeping your home). On the other hand, filing for Chapter 13 bankruptcy gives you a court-approved payment plan to pay off your debts without requiring you to liquidate your assets.
4. Find new streams of income
When homeowners have trouble paying their mortgage, it is usually an issue with income. If not enough money is coming in every month, find ways to supplement the gap through other means. You can get another job, start a home-based business, sell your assets, or borrow money from friends and family.
Unexpected events in our life can lead to the inability to pay off our mortgages. If a foreclosure notice arrives at your doorstep, you can still do something to keep your home.