How to prevent Foreclosure / foreclosure prevention tips
The easiest, safest, and least expensive way to prevent foreclosure is to not get into it in the first place! Whenever possible, pay your monthly mortgage payment! The consequences of not paying can be devastating you credit can be negatively impacted, which can hurt you in the future when applying for loans or even jobs. You can incur thousands of dollars in late fees, interest charges, and collection costs. And you can be evicted and forced out into the street.
If you have the means to pay your monthly mortgage, pay it! If you are having problems making the payments, don't hide from that fact take immediate action. Call your mortgage company and try to work out a loan modification plan that is affordable, reduces what you owe, locks in a fixed interest rate, and most of all has monthly payments you can afford to pay each month. But the time to start preparing for a modification is now, not on the eve of a foreclosure sale!
What is a Loan Modification?
A loan modification is exactly what the name says a modification, or renegotiation, of your mortgage loan. Modifications vary by loan, property, and other circumstances, and can involve a new, lower fixed interest rate, increasing the amount of time you have to repay your loan (for instance, allowing you 40 years instead of 30 years to repay your loan, which lowers the monthly payment), and sometimes even reduction in principal.
Why Would a Mortgage Company Agree to a Loan Modification?
The short answer is, loan modifications cost the mortgage company less money than foreclosures. Mortgage companies do not want to be in the business of being landlords they want to be in the business of making loans and collecting payments. Mortgage companies lose when homes are foreclosed and sold at auction.
For example, if a bank loans Bob $200,000 to buy a home at 7% interest over 30 years, the bank will make about $280,000 in interest over the life of the loan, and Bob's monthly payments will be about $1,330 (this is a very simplified version of things). But if Bob gets his salary cut and can only afford to pay $1,000 per month, the bank has 2 choices:
A) The bank can foreclose on Bob's house and sell it at auction. But because property values have dropped everywhere, Bob's house might only be worth $160,000 now, not the original $200,000. Plus the bank has to pay foreclosure fees, lawyer costs, court costs, etc. All in all, the bank will probably lose about $50,000 by foreclosing on Bob.
B) On the other hand, if the bank chooses to work with Bob and find a payment he can afford, things turn out differently. Say for instance the bank agrees to reduce the amount Bob owes to $180,000, lowers his interest to 6%, and extends the length of his loan from 30 years to 40 years. Now, Bob's monthly payment is $980, well within the range he can afford. The bank, even with the reduction in principal and lower interest rate, will earn over $295,000 in interest over the life of the loan!
The difference between a bank foreclosing verses modifying a loan is staggering! Lose $50,000 by foreclosing, or make over $295,000 by modifying! Which would you choose?
Nobody wins in foreclosure (except the foreclosure mill law firms!) Don't ignore the facts if you are facing the possibility of foreclosure, take action now! Call the experienced attorneys at the Byrne Law Group for a FREE no cost, no obligation consultation and to learn about your options! Call 813-413-6565 right now and start to feel better about your future!