While many homeowners who read this article would ideally want to save their home from foreclosure, this may not always be the best solution to a financial problem. But too often, the emotional attachment that owners have to a property is strong enough that they would like to keep the house, even if the plan they use to save it is not reasonable for the long term.
Most borrowers should utilize various options to stop foreclosure, but even before deciding on a plan of action, they should decide whether the house is worth saving or not. Depending on the answer to that question, their plans to deal with the property and the foreclosing lender will be drastically different.
The first consideration that homeowners should have is for the equity in the property. If there is a large amount of equity, it may be worth finding a solution to foreclosure and holding onto the property. Of course, with property values in decline in many parts of the country, many fewer owners have any equity at all than did just a few years ago.
Secondly, homeowners facing foreclosure should decide if there are any other economic reasons to keep the house besides just the equity in the property. For instance, if there is a second mortgage that may sue after a foreclosure sale, then it may make more sense to negotiate with both lenders to find a way to get the loans back on track.
A third consideration in deciding whether to keep or give up a house due to foreclosure is the emotional value the home has for the owners. A brand new home built a few years ago will have different sentimental value than the property one of the owners grew up in. If the house does have this type of emotional content, then it may be important for the owners to try to save, regardless of the amount of equity.
A further consideration should be whether the owners believe they will be able to make reasonable mortgage payments over the long term. A temporary financial setback can be overcome and the creditors negotiated with. A longer term financial change, however, may make it impossible to save the home, and other solutions should be pursued in such cases.
Finally, homeowners facing foreclosure should attempt to work with their bank even if it is just for more time to sell or move out. But their negotiations with the lender over small issues will help them determine how easy it would be to deal with the bank for more substantive changes to the loan. If the bank is unwilling to work with borrowers, it may not make sense to pursue many options to avoid foreclosure.
Borrowers should decide whether their home is worth keeping even before they begin negotiate with their lender for solutions to foreclosure. What they negotiate for, whether more time to sell, a short sale, or a mortgage modification, will all depend on whether or not the home is even worth saving in the first place.
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