What to Do if Your Property is Foreclosed

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If your property is foreclosed, it means that the terms of your mortgage agreement have not been met and payments have been missed.

What is foreclosure?

Foreclosure is the legal term for the process that lenders go through to recoup their money on a mortgage or other loan secured against a property, where the borrower has missed payments or another clause of the loan agreement has been broken.

Ultimately the lender will put the house on the market and use the money from the sale to pay back the balance of the loan.

Speak with your lender

At any time before your home is actually sold as a result of foreclosure, you have the opportunity to pay back the arrears and prevent your home from being sold.

For this reason, it’s important that you speak to your lender as soon as you realize that you might struggle to make your payments and see if you can come to an arrangement. Most lenders don’t want to foreclose, the process is costly to them, and they would much rather keep people in their homes. 

Your lender may be able to offer you payment restructuring or even a repayment holiday. It’s always worth talking with them to find out what can be done.

Alternative financing

If your lender is unable to help you and you are unable to secure funds any other way, then another option is foreclosure finance.

Foreclosure finance is a secured short-term loan designed to keep you from foreclosing on your property. However, before taking on foreclosure finance, you should ensure that you can definitely afford to repay it; otherwise, you could worsen your situation.

If you know that you have some money coming to you, then foreclosure finance can help you to bridge the gap. It’s also sometimes used by people who are developing properties and expect to make a profit once the property is sold

How does the process work?

Before you get to the foreclosure stage, you will go through a couple of stages.

The first stage is missed payment. This means that you have missed a single mortgage payment. Your mortgage provider will usually notify you of this and give you a certain amount of time within which to make the payment. You will probably be charged a late fee, and your credit score will be affected.

After the missed payment stage, you are considered to be in default. Your lender will file a lawsuit at this stage which starts the foreclosure process.

Between the default and the notice of sale, you will be in what’s known as pre-foreclosure. At this stage, you can still make an agreement with your lender to allow you to keep your property, so it’s important to communicate with them.

Once the property is actually sold, you will need to vacate. You may be given some time to do this, but it usually won’t be more than a few weeks. 

It’s worth noting that if there is any profit made on the sale after the debt has been repaid, you should get to keep it.

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