What Are the Alternatives to a Foreclosure?

If you are behind on your mortgage payments and worry that you may face foreclosure, you can explore some of the alternatives to foreclosure. The options can be divided by two situations, one where you get to keep your home, the other where you will eventually lose your home.

Here are some of the alternatives to foreclosure that will allow you to keep your property:

• Forbearance: Forbearance means that your payment obligations are temporarily suspended for a period of time. During that period, you are given the chance to make up the payments that you have missed. During the forbearance period, your lender will not be able to foreclose your home. If you're able to clear all late payments during the forbearance period, your mortgage will go back to normal.

• Repayment Plan: Your lenders may be willing to offer a repayment plan where your overdue amount can be allocated to some of your future payments until you become current against on your mortgage payment.

• Loan Modification: You could also try to negotiate with your lender to modify your current loan terms with the ultimate goal of having a lower monthly payment. You lenders can typically modify the loan terms by reducing your principal amount or interest rate. They could also extend the term of your loan. However, this could cause your total loan amount to go up.

• Refinance: If you have already made enough payments and accumulated enough equity in your house, your lender may consider refinancing your loan. You can refer to our refinance section for more information.

• Partial Claim: If the mortgage you have is an FHA loan that meets HUD's guidelines, you may be eligible for a Partial Claim. Partial Claim is an interest-free loan in addition to your original mortgage, offered to help you catch up on your delinquent mortgage. You will usually pay back the Partial Claim after your original mortgage is paid off or after your property is sold.

• Forgiving a Payment: You could also ask your lender to forgive a payment, but lenders very rarely agree. In the unlikely event that your lender agrees to forgive you for your missed payments, you will need to promise to make on time payments for the remainder of your mortgage.

Here are some of the alternatives to foreclosure you could consider if you are unable to maintain your property:

• Short Sale: Short sale means you are selling your property for less than the outstanding balance of your mortgage. Your lender has to first approve your decision for a short sale. You will then negotiate with a buyer for the sale. Your lender may be willing to accept a payment that is smaller than your mortgage balance because this helps your lender avoid foreclosure, which can be expensive and time consuming.

• Deed in Lieu: Also known as a deed in lieu of foreclosure, this option means that you will surrender your property to your lender and in exchange, ask to be released from all your obligations under the mortgage. This is another way that your lender can avoid foreclosure. Deed in lieu also has a less negative effect on your credit score.