Mortgage Rate News

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It is true that there are many loan modification opportunities, as well as the ability to refinance if you are concerned about losing your home to foreclosure. However, in some cases, you might not qualify for these types of programs. This can be discouraging, since it may seem that your only way out is bankruptcy.

Before you get too drastic, however, you might try some other stop-gap measures — assuming you want to try and save your home from foreclosure. Here are some things you can do to stave of foreclosure:

• Working a deal with your mortgage lender: If you have fallen on hard times, let your lender know. If you have been a good customer, and if you are committed to paying your mortgage, you might be able to convince your lender to let you pay only the interest, or lower your payments for six to 18 months while you look for a job or get back on your feet.
• Use your home equity line of credit: This is tricky. And to be employed only sparingly. But if you have run into a couple of bad months, but can see the light at the end of the tunnel, you can use your home equity line of credit to cover your mortgage payments. But realize that this is just getting you into more debt. This should only be used as a temporary stop-gap if you don’t want to deplete your savings or raid your investments.
• Borrowing against your 401k: This is not an ideal solution, but if you are trying to prevent foreclosure, you are not in an ideal situation. You can get a low-interest loan against your 401k. And you are paying yourself back. But the downside is that the principal in your 401k is reduced, and so it isn’t going to work for you. You may have to make up for it later, when it comes time to retire.
• Short sale: If all else fails, you may have to sell anyway. A short sale can help you avoid foreclosure, but it still will likely have an adverse impact on your credit score.

One of the more interesting issues to consider when you are in financial straits and planning to declare bankruptcy is what happens to your mortgage when you file. There are many different scenarios. In some cases, it is possible to save your home and protect it — as long as you will be able to afford to make your mortgage payments after the rest of your debts have been discharged. If you can’t afford the payments, you can actually walk away clear, as long as you have not affirmed your debt. First and second mortgages (but not liens) will be cleared as part of your bankruptcy proceedings.

You should realize, though, that any homeowners association fees accumulated after you file will be your responsibility. It’s a bit of a quirky rule. All of what you owe prior to filing can be cleared, but fees that pile up after you have filed need to be paid by you.

Trying to avoid bankruptcy

It is better, though, if you can avoid bankruptcy. Some people use bankruptcy as a method of postponing foreclosure. However, this can backfire, and may not be the best option. Instead, carefully review your options and see whether you can get a loan modification or sell your home in a short sale. (Be careful with a short sale; you may end up signing an agreement to repay a junior lien — and you don’t want to do that.)

In the end, bankruptcy should be your option of last resort. And before you file, make sure you consult with a knowledgeable attorney. You want to arrange things so that you get the maximum protection, and agree as few obligations as possible, if you are truly in need of bankruptcy to get you back on your feet. And once you are through with the process, it is vital that you proceed carefully and begin rebuilding your credit.

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Many seniors are lamenting the hit taken to their retirement accounts and other investments. As a result, they are looking for a little extra cash to help them ride out this recession while not depleting the principal in investment accounts. One of the ways to do this is through a reverse mortgage. And, with conditions starting to improve a bit, some seniors can get a little more in terms of a reverse mortgage. Golden Gateway Financial offers this information in a recent press release:

New legislation temporarily increased the reverse mortgage limit available to homeowners in 2009 to $625,500. This means that many seniors can now extract even more equity from their home as cash in a reverse mortgage. At the same time, the latest S&P/Case-Shiller Home Prices Indices showed that home prices are once again beginning to climb. Together, these two factors have provided seniors with a short window in which they can potentially earn more from their available equity than before and more than they might be eligible for next year.

However, it is important to be careful when getting a reverse mortgage. Interest charges can be very high, as can other fees. It is also important to realize that when the house is sold, or if you no longer live in it as a primary residence, the loan has to be paid back — it is a mortgage, after all. This means that the proceeds of the sale must be used pay off the loan, or some other payment schedule must be arranged.

At any rate, before deciding on a reverse mortgage, it is important to consult with a trusted and knowledgeable advisor who can help you determine the best course of action for you. It may be that a reverse mortgage is just the thing — or you may be better served with some other financial product or service.