Reinstate the Loan - get the money needed to pay off the arrears and get yourself back on track. This money can come from several sources:
1) New Bank Loan - A mortgage professional can tell you if you qualify.
2) Family or Friends - If they are willing and able, you can usually get better terms from someone you know.
3) Retirement plan or life insurance loans - Beware of penalties if not paid back soon enough, and of course remember that you are going to have to retire at some point.
4) Hard money loan- Hard money is lent to people who do not qualify for conventional or even sub prime loans. These loans generally come with high interest rates and other fees. Although expensive, they can be a valid choice in the right circumstances if the loan is being made by a reputable source. Hard money lenders can foreclose quicker and easier than regular lenders so Make sure you can afford the additional payment.
5) Unsecured Loans - I have seen ads where people are attempting to sell lists or in some way taking an up front fee for finding such a loan. In other related cases credit cards are offered enabling a credit line even with very bad credit, where in reality the application fees, annual fees and other miscellaneous fees result with the borrower essentially paying $250.00 for a $250.00 line of credit. Another trick gaining popularity are "payday loans" or auto "title loans." AVOID THEM LIKE THE PLAGUE! The hidden interest rates on these loans can be 500% per year! If you have very bad credit and need money don't make things worse by falling prey to a scam.
Refinance - With the help of a mortgage professional you can explore your chances of getting a new loan.
Loss Mitigation - Work out a repayment plan or other agreement with your lender. You can do this on your own and banks are becoming more cooperative. Always make sure you can afford the additional payment.
Bankruptcy - This is really just a Band-Aid. It only stalls the foreclosure process temporarily, but it does serve a purpose in the right situation. Just make sure you get an ethical attorney.
Chapter 7 is designed to unload all your debt, and will only buy you a little bit of time. You do have the choice to reaffirm the mortgage, meaning you state that you want to keep that debt. This may be an option if you have a lot of credit card and other consumer debt that is pulling you under. Be sure to speak with a good attorney before filing any kind of bankruptcy as the effects on your credit can last for a long time.
Chapter 13 is designed to restructure your debt and arrange for you to repay on a monthly basis. It can work if you can afford the payments, but if you miss a payment the bank can file a Release of Stay and take the mortgage out of the bankruptcy filing. They are then free to proceed with the foreclosure.
Stay without Ownership - Sell the property to someone who will let you stay as a tenant and maybe even arrange for you to buy it back on preset terms. This is called a Lease with Option to Purchase. You rent the property and have the option to buy it back within a set period of time, usually 1-2 years. During that time you can work on rebuilding your credit and get ready to qualify for a new loan. Just please be careful about who you work with and understand what you are signing.
If whatever caused you to fall behind has not been resolved
and you don’t see things changing, you need to move on
in the way that serves you best.
