Posted: 1 Oct '19

When is it Time to Use a Mortgage Loan to Avoid Foreclosure?

For a variety of reasons, debts can pile up that may challenge your ability to make your regular mortgage payments on time. You eventually may begin to receive warnings from your bank or mortgage company that, unless payments are brought current, they will start the foreclosure process.

Before this situation can develop, you should act immediately. Waiting too long will only further limit your options.

Look for Solid Advice and Concrete Solutions

While it is always a good idea to seek the advice of a friend or relative, they may not know the nuances of the foreclosure process and how it works.

Communicating with your current mortgage lender of your financial circumstances is very important. Possibly, if you have not missed payments yet, your lender may have a special hardship program that could help you get “over the hump” and eliminate the stress of foreclosure.

Homeowners who’s current mortgage lender has exhausted all options might need help to secure a mortgage loan for foreclosure. The process can be complex because there are lawyers, the courts, and many other moving parts that you need to be aware of. Meeting with a mortgage broker with expertise in this area is a very important step.

Refinancing to Prevent Foreclosure

Getting a mortgage loan for foreclosure is often expensive and might seem counterintuitive, but this can be one solution when combined with an exit strategy.

Adverse circumstances like a job loss, the use of other credit sources to stay afloat and a severe drop in your credit rating can make securing a new mortgage loan from a conventional lender difficult.

However, you may qualify for refinancing if:

  • You are re-employed and have a solution to make the new mortgage payments.
  • Your accumulated equity in the home is 20% or above.

Refinancing a mortgage for foreclosure avoidance could truly help your situation. You might be able to apply for a cash-out refinance that lets you pay off other debt and begin anew with your new mortgage.

Alternative Mortgage Lending

When refinancing from a traditional lender to avoid foreclosure is not possible, Canadians have other avenues. If you have at least 20% equity in your home and a steady income, alternative lenders offer Refinance Buy Back Programs that can help you stay in your home even if you have poor credit.

Here’s how this works.

  1. The alternative lender will step in to pay off your entire existing mortgage before foreclosure.
  2. You will make interest only payments to this lender while you are getting your finances and credit rating back in shape.
  3. You work to pay down other debt and rebuild your credit rating.
  4. After 1-2 years, you can refinance since you will have a higher credit rating and improved financial circumstances.

An alternative mortgage loan for foreclosure is not meant to last for an extended period. These are designed as short term bandaids to allow you to remain in place until you can reorganize your finances and qualify for a new mortgage with a traditional lender.

Typically, this type of mortgage loan for foreclosure program will last two to three years, enough time to bridge the gap between imminent foreclosure and fiscal responsibility.

Contact Your Mortgage Broker

The professionals at Bad Credit Mortgage Brokers are experts at helping people work through difficult financial situations. Before your financial circumstances become overwhelming, you should seek help and seek debt relief to prevent foreclosure. We can work with you to:

  • Find an alternative lender for a mortgage loan for foreclosure avoidance
  • Seek options to alleviate financial hardship
  • Forestall selling your home to avoid foreclosure with strategies by managing your other debts
  • Develop responsible spending habits
  • Create a budget
  • Track spending

Never wait until it’s too late to prevent a foreclosure. When you see financial danger looming in the near future, contact an expert right away.

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