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Home equity could prevent foreclosure
As interest rates rise and the economy stalls, more and more homeowners are facing foreclosure. That’s bad for your credit score, but there may be a way to prevent it. Your home equity could be your savior if you face losing your home.
More below.
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The real estate boom of the last five years has been unprecedented. Not only have housing prices reached all time highs, but home ownership is also at an all time high. Nearly 70% of Americans now own their own homes. Unfortunately, the economy is slowing down a bit and interest rates have been steadily rising for the past two years. That being the case, many homeowners who have adjustable rate mortgages, Option ARM loans, or piggyback loans are now seeing increases in their monthly payments that may be high enough to make their homes unaffordable for them. In fact, foreclosure rates are up all across the country, as more and more owners find that the creative financing that seemed like such a great idea three or four years ago isn’t such a good idea now.
If you cannot afford your home, you are likely to panic. After all, if you miss payments, your lender is eventually going to start foreclosure proceedings and you will likely lose your home. Worse than that, your credit will be harmed, making it difficult, if not impossible, to secure financing for a new house anytime soon. You could respond to one of those ads found around town that offer “foreclosure help”, but those are just scams. Those people, while offering to help, will actually do whatever they can to steal your home outright. They will ask you to “temporarily” sign over your deed to them, while they offer to make up your missed payments. They will then sell your home back to you later, when you are in a better position to pay. But they won’t. Once you sign over the deed, they will evict you and sell the house. You don’t want that.
What can you do?
As it happens, your house itself may have the answer.
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During the home explosion of the past five years, home values have skyrocketed. In all likelihood, the value of your own house has increased, as well. It’s probably worth more than you paid for it. In fact, it could be worth a lot more. In some places, houses have been appreciating at 30% per year. If you are lucky enough to be in such a situation, you may have a way out. Instead of simply giving your property back to the lender, as you would in a foreclosure, you can simply put it up for sale. Once you sell it, you can pay off your mortgage and you will actually have money leftover to put down on another, more affordable, house.
This can work in a pinch, but we should point out that the first thing you should do if you find that you cannot afford your mortgage payments is to call your lender. Believe it or not, lenders do not like to foreclose. They are not in the real estate business, they are in the lending business. Foreclosure costs them money, and they would like to avoid if at all possible. If you have financial problems, call your lender first.
If you have a mortgage with a high rate of interest, you may need to consider refinancing your mortgage. You may combine your debts and lower your monthly mortgage payments. Ameriquest Mortgage can arrange for you to refinance now.
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