If a homeowner is unable to pay their mortgage, the lender can seize the home. Foreclosure in Topeka, KS can leave a serious blemish on a homeowner’s credit and it can cost everything invested in the home. While some struggle to make payments in spite of financial roadblocks, others sell the home or declare bankruptcy to avoid foreclosure. However, in some cases, foreclosure can be beneficial for the reasons below.
It Encourages the Lender to Work with the Borrower
Lenders are reluctant to spend money and time on foreclosure if the homeowner can come up with an alternative. If a borrower goes into default, the lender may consider a mortgage modification that stretches the loan payments over a longer time. If the homeowner qualifies for the Making Home Affordable modification program, the US government may offer the lender a financial incentive to lower the loan’s interest rate. In any case, the owner can end up in a more favorable financial position.
It Helps the Owner Save Money
If the homeowner realizes there’s no way out of foreclosure, the best strategy may be to stop trying to make payments. Instead of struggling to keep up, the borrower can start setting money aside to make a fresh start when the foreclosure process is over. A homeowner can’t be evicted until the house is sold, which may take up to a year. However, if the sale doesn’t pay the debt, the lender may be allowed to pursue the borrower for the deficiency.
More Effective Financial Management
Even after the foreclosure process starts, a borrower can stop it if they come up with the money to catch up on defaulted payments, fees and interest. If overspending is part of the issue, foreclosure could provide motivation to make cuts in other areas in order to keep the home. HUD (the Department of Housing and Urban Development) has a network of counselors who offer free foreclosure advice; alternatively, the borrower can consult a foreclosure lawyer with Joewlaw.com.
A New Start
When the economic downturn occurred, many homeowners ended up owing mortgages in excess of the home’s value. In such cases, foreclosure in Topeka, KS may be the most effective way to unload the burden. Homeowners should consider the level of equity in the home (its value minus the mortgage debt) and if the equity is less than 25%, walking away may be a viable option.