Money woes, and worse, a foreclosure during the holidays spell trouble, especially for baby boomers. With a different perspective and careful planning, however, impending foreclosure during the holidays can leave you feeling hopeful, because it’s a chance to fix your finances.
Follow these tips for a financially relaxed holiday season:
Don’t Panic:
You don’t have to ignore it or to pretend that a foreclosure notice does not exist. In fact, that’s the worst thing you can do. Accept the fact that unless you take action now, you’re going to lose your home. Your next step is to start exploring options of how you can pay off your mortgage. Obviously, you’re in this dire situation because something came up that took you off track. Beating yourself up won’t help the situation, putting one foot in front of the other—small steps forward—will.
Calculate Your Assets and Liabilities:
What are your numbers? When in distress, many people resist looking at bills that keep piling up in the mail. This is one of those situations where ignorance is definitely not bliss. The longer you avoid looking at who you owe and how much, the bigger your problem will become. The best thing you can do at this stage is to face the music. Open the bills, get clear on the numbers you owe, and find out how much you need to recover from it. Don’t be afraid to call your mortgage lender to ask them what you can work out together.
Refinance or Get a Loan Modification:
Let’s say you bought your house back in 2005 for $250,000 at an interest rate of 8%. It was a great deal at the time especially since you didn’t have to put any money down. When you include property taxes, your monthly payment comes out around $2,147. The way interest works, by the time you’re at year 30 (paying 8% interest), you will have paid a total of $410,388 above the $250,000 you originally borrowed.
Back in 2005, you may have been able to easily afford that amount, but since then you’ve experienced some life changes that have been stretching your budget. These days, it has become a struggle to make that payment every month and still afford your day-to-day living. Try as you might, you’ve fallen behind on your mortgage payments. As someone who’s used keeping everything up-to-date, it has taken its toll on you and now you’re really stuck. Here’s where reaching out to your mortgage lender can really help you.
The reality is that banks are not in the business of owning real estate. It’s cumbersome and if they have to foreclose on you, it means they are taking a loss on their investment of providing you with a mortgage. With all that said, it’s highly possible that they’d be willing to work out a new agreement with you in the form of a refinance or a loan modification. When you refinance, the goal is to be able to take advantage of a lower interest rate and lower monthly payments. Additionally, if you have enough equity in your house, you may not have to pay private mortgage insurance (PMI). Keep in mind, refinancing is not free. You will have to pay fees and closing costs associated with securing a new mortgage—similar to when you first bought your home. After all, the banks do want to make a profit on their transactions!
Another option is a Loan Modification. A loan modification is different from a refinance because it is not a long-term solution. With a modification, your original loan does not change, but your payments may be reduced for a short period of time to allow you to get back on your feet financially. A loan modification is an option if you’re unable to qualify for a mortgage refinance.
Sell Your House:
Can you sell your house even if the bank has told you they’re going to foreclose? Yes, you can. If you can no longer afford the cost of the mortgage payment, selling your house to prevent foreclosure is a good option. Selling will give you an opportunity to move on with your life and start fresh versus being saddled for many years with a stain on your credit report due to your house being foreclosed upon. Digging yourself out of a foreclosure is a lengthy process, and for some people, devastating blow—financially and emotionally—that they never recover from. If you sell your house, you can immediately remove one huge burden from your shoulders–especially if you’re able to sell to a residential investor that will pay you cash or structure a deal to help you out of the situation. It’s quite possible you can walk away with cash in hand that you can use to find a new home, pay off debts or do as you choose.
Foreclosure is something you want to avoid if you can help it. A foreclosure will hurt your credit for many years to come. It can even make getting approved to rent a home difficult. Next Chapter Property Solutions has bought many homes from homeowners facing foreclosure. The choice about your next step is totally up to you. Whatever you decide, know that you have options and we can help.
Embrace the fact that holiday season is here and while you don’t have the money to splurge on shopping, dining, and presents, true happiness comes from within. If possible, surround yourself with people who love you and (free or low-cost) experiences that bring you joy. This is not the end of the world. It could be the beginning of a fresh start for you.