There are a few ways to deal with a
defaulted mortgage loan that avoid foreclosure. One way is to offer a short
sale of your home to the lender, which is essentially an agreement whereby the
lender accepts less than what is owed on your mortgage loan. Another option is
to ask for a modification of your existing mortgage, so you can get back on
track with the payments. The terms of a modification vary but generally include
a reduction in interest rate, which results in a lower payment. But it can be
hard to know which choice will work best for you, or whether you can pursue
multiple avenues of relief at one time.
For instance, you might need to know if you
can ask for a modification while you are trying to get the lender to agree to a short
sale. Here is what you can expect with each type of relief:
• In a short
sale you can avoid foreclosure by getting the lender to take the property back
for less than what you owe, and that money usually comes from a sale of the
property on the real estate market. This can take a while to get done, because
you still have to find a buyer and the bank has to agree to the price. There
are no guarantees that the bank will accept the short sale offer, but if they
do you might still owe! This is because the amount of loan not paid, the amount
the short sale was “short”, is forgiven and considered income by the IRS. That
means you will receive a 1099 and have to report the amount forgiven as income
and pay taxes on that amount. Most homeowners are not able to do this, so a
short sale is not always the best option.
• With a
mortgage loan modification you can rest easy knowing that if approved, you will
enjoy the benefit of better loan terms. You might also get to skip a month’s
payment, allowing you to put some money aside for other bills.
If either of these options sound appealing
to you, call us for more information. We can explain them each in more detail
and as they apply to your specific circumstances.
If you have more
questions about short sales and mortgage modifications, contact us at www.law-ri.com. We will help by coming up with solutions that
work for you and have multiple locations to meet your needs for office visits.
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