Even if the homeowner has a solid argument, fighting foreclosure on a property may not always be the best option. Do not let your emotional relationship with your house influence your decision-making process when it comes to your financial position. Because of the importance of these problems, they should be given serious consideration, especially your equity in your house, your realistic chances of making mortgage payments, and your ability to lower your debt.
If, for example, you have little or no equity in your house, you may not want to maintain it. When it comes to equity, your home’s value that is above what you owe on the loan is what counts. If the homeowner owes more than the value of the house, this is known as a negative equity situation. For a more accurate assessment of the value of your property, you may use a website such as the Zillow Real Estate site to look at homes comparable to yours in your neighborhood, or you can talk to a real estate agent to get a price range for your home.
Maintaining Mortgage Obligations
Even if your house has considerable equity, you may be unable to make your mortgage payments. A higher percentage of your overall income may go towards paying off your mortgage if this is the case. If this is the case, you may experience a significant strain in paying for basics, such as food and utilities. Even though you want to maintain your house, you can’t afford to do so. You don’t expect any changes to your circumstances in the foreseeable future.
To get the greatest possible reduction in the total amount you pay each month on your mortgage, you should devote a percentage (before taxes) of less than 30% of your entire income to payments. When a homeowner doesn’t possess a car, has no dependent family members, and doesn’t have any significant health issues, then it is possible to diverge from that criterion. In contrast, it may be more financially sound to invest 25-30% of your entire salary into your mortgage. The money might be used to help your family if you or a family member has a significant sickness or injury, such as a disability or the illness or injury of a close relative.
Trying to Reduce Debt
In certain cases, homeowners who are falling behind on their mortgage payments will conclude that they will never catch up, but they still want to find a way to maintain their homes. If they want to pay down their debt, they might be able to look into alternative options outside of just paying down the mortgage to accommodate the additional debt. You might look at each of your spending items to see if you can cut prices and avoid a foreclosure, or you can use a housing counselor to analyze the many expenses and regions of spending.
If you meet the loan modification standards that your lender offers, you should try to negotiate a loan modification with your lender. You may have a larger range of financing alternatives if you have a Fannie Mae or Freddie Mac mortgage, or if you have an FHA loan.
In the last instance, a homeowner may go through Chapter 13 bankruptcy. They will maintain their house (and all of their other property) while repaying their debts over a three to five-year payback period using a plan that stretches out the payments over that time period. Filing for Chapter 7 bankruptcy will result in the loss of your house if you have equity in it and can not satisfy all of your debt, because homestead exemptions apply only to primary residences. To learn more about the homestead exemption, see this article.
Wrapping Up
If you have little or no equity in your house, you may not want to maintain it. Even if the homeowner has a solid argument, fighting foreclosure on a property may not always be the best option. Do not let your emotional relationship with your house influence your decision-making process. If you meet the loan modification standards that your lender offers, you should try to negotiate a loan modification. You may have a larger range of financing alternatives if you have a Fannie Mae or Freddie Mac mortgage. If you are in Chapter 7 bankruptcy, you may lose your house.