| Foreclosure is the legal process that a lender initiates | | | | refinancing becomes a viable option wherein one |
| to get ownership of a mortgaged property wherein | | | | acquires a second loan to pay off all outstanding dues |
| the loan payment is in arrears. Circumstances leading | | | | and start afresh. |
| to foreclosure generally occur due to any unforeseen | | | | Partial claim policy, applicable for certain kinds of loans, |
| event which makes it difficult for the borrower to | | | | helps the property owner to get financial aid in the |
| make regular monthly payments in the form of | | | | form of a one-time loan to cover missed payments. |
| installments. | | | | The loan is repaid after the original mortgage is |
| Negotiate for best results | | | | cleared. |
| Payment default can occur in spite of one's best | | | | Short sale and deed-in-lieu of foreclosure |
| planning. The reason could be a job loss, interest rate | | | | In situations where the property costs less than the |
| fluctuations, house repair or any unanticipated event | | | | mortgage, owners prefer to sell the property in a |
| that puts a strain on existing resources. In these | | | | transaction known as a "short sale". Short sale |
| situations its best to approach the lender and discuss | | | | proceedings require the lender's permission as well as |
| the situation before the arrears go on increasing. | | | | certain conditions like apprised value to be at least |
| Banks and other financial institutions generally are willing | | | | 70% of the amount due, loan delinquency period to be |
| to modify the loan payment if the borrower | | | | of minimum 2 months and the property to be sold |
| approaches them for negotiation instead of allowing | | | | within a stated period. |
| the payments to default. This helps in postponing the | | | | As a last resort the owner can also voluntarily transfer |
| filing of a Notice of Default which once issued limits the | | | | deed of ownership to the lender and avoid foreclosure. |
| options of the borrower to negotiate. | | | | The deed-in-lieu of foreclosure option however may |
| Options to avoid foreclosure | | | | not be suitable for all as the owner could be asked to |
| Forbearance and special payment plans | | | | repay the balance amount if the apprised cost of the |
| A repayment plan is charted with a reduction in the | | | | home is less than the mortgage. |
| monthly dues and increase in tenure with a lump sum | | | | Checklist for home loan applicants |
| payment. This process is known as forbearance and | | | | Before availing of a home loan it is advisable to take |
| is a good option where a steady income is available. In | | | | into consideration the long term obligations that come |
| case the dues owing are on the higher side, payment | | | | with the loan. Prudent borrowers often keep in mind |
| plans enable one to get back on track with a slight | | | | the following factors before applying for a loan |
| increase in installment and tenure, an option that can be | | | | 1. Current and potential market rate of the property |
| utilized if one's financial situation starts improving. | | | | 2. Capital at disposal and required credit amount |
| Amortization, refinancing and partial claim | | | | 3. Loan amount, tenure and rate that can be borne for |
| Banks also are willing to modify interest rates and | | | | at least five years |
| amortization schedule where the credit score is good | | | | 4. Means of repayment and reliability of income source |
| and earlier payments were regular. Amortization is the | | | | 5. Current and near future living expenses and taxes |
| repayment schedule of the loan based on the interest | | | | 6. Assets to fall back on in case of unexpected |
| and principal amount ratio in each installment. | | | | expenses |
| If one has sizable equity in one's property then | | | | 7. |