The worst outcome of a loan default is foreclosure. This is a legal process which implies that your lender can take over your home. In that case, you have to leave your home. Again, in case the value of your home is less than the amount you owe, a deficiency judgment is pursued. In case of a deficiency judgment, you not only have to lose your home but also have to owe an additional amount to the HUD. Again, both foreclosures and deficiency judgments have serious negative effects on your credit. These will imperil your chances to get a new credit. Here we briefly discuss about some ways by following which you can avoid foreclosure.
Mortgage modification
One smart way to avoid foreclosure is to opt for mortgage modification. Through mortgage modification, you can extend the term of the mortgage loan that you have taken out or you can also opt for mortgage refinancing. Anyways, this will lower down the monthly mortgage payment amount and will make the mortgage loan more affordable to you.
Mortgage forbearance
Sometimes, your lender may be willing to offer you a new repayment plan. The new repayment plan may include a temporary reduction in the loan payment or suspension of the loan payments. But, you have to convince your lender that you will be able to fulfill the requirements of the new payment plan.
Deed in lieu of foreclosure
A deed in lieu of foreclosure implies voluntary giving back your property to your lender. Though, a deed in lieu of foreclosure would not save your house, but the negative impacts of deed in lieu of foreclosure are less than that of foreclosure.
Foreclosure is regarded as the last option available before you. The negative consequences of foreclosure are deep and remain for a long time. So, you must try your best so as to avoid filing for foreclosure.