Stalling A "Foreclosure" When Living In A Distressed Property
When you purchase a home, your mortgage provider generally reserves something called the "power of sale." The power of sale means that they are able to sell your property if you ever fall into default; if you stop paying your mortgage, the property can be foreclosed on. Foreclosure is always a bad thing: not only will it be on your credit report, but it will also mean that you're still liable for the difference owed between the sales property of the house and your actual mortgage. Luckily, there are some alternatives.
Contact the Bank About Short-Selling Your Property
Most banks prefer short sales over a foreclosure. Related to this, most banks won't even consider a short sale unless a property is heading towards foreclosure. In a short sale, the bank lets you sell your property for less than you owe. If you owe $100,000, the bank may let you sell for $80,000 just to get the property out from under you. However, you'll still owe taxes on the $20,000 difference that you were forgiven, as it's essentially "income" to you.
Sell the Property Before You Foreclose
Once you're already in foreclosure, you no longer are able to sell your property -- the bank has already begun proceedings. But if you've been notified that the bank is going to foreclose on your property, you might just be able to sell it quickly. You don't need permission for a short sale if you are able to sell it for more than you owe to the bank. Just remember that you're also going to have to pay a real estate agent's fees on top of what you owe; if you owe $80,000 on your home, you'll probably need to sell it for at least $90,000 to $100,000 in order to break even.
Get Your Loan Restructured
Sometimes people fall behind in their mortgage through no fault of their own. This can happen if you've just suddenly lost a job or come down with serious medical expenses. If your financial situation has now changed, the mortgage servicing company may be willing to either restructure your loan (lowering your payments) or rehabilitate your loan (letting you get back on track with a sequence of on-time payments). Again, this requires clear communication between you and the bank.
The most dangerous thing you can do throughout the process of a foreclosure is to remain silent. Banks hate foreclosing on properties; it causes them a lot of work and ultimately loses them a lot of money. However, they have very little choice if an individual in one of their properties simply stops communicating with them. By remaining communicative and telling the bank of your financial situation, you may be able to work something out.
Get in touch with a group like Mortgage Associates Ontario for more information.