Not many of life’s difficulties are as stressful to New Jersey residents as finding that they are looking at a possible foreclosure on their home. There are different kinds of options available for some homeowners that can prevent the foreclosure under certain circumstances. Some options can be less stressful, however, than others.
As explained by Bankrate.com, speaking to the lender about these options may be a first wise step.
One option is a loan modification. This is when the lender agrees to adjust the terms of the loan so that the borrower can comply with the newly modified mortgage terms. One of the most common modifications is that of extending the term of the loan. If there are 16 years left of payments, a borrower may be able to turn that into a 30-year period.
Because there will be nearly twice as many payments made on the loan, the required amount for each payment can be significantly smaller. Smaller payments may make it affordable for the homeowner to continue paying responsibly.
Another possibility is establishing a repayment plan. This may be most appropriate if the borrower has suffered a brief financial lapse due to an event that will not necessarily occur again any time soon, such as an unexpected medical bill. If that financial difficulty caused only a missed payment or two, a lender may allow the borrower to repay the missed months in the near term, such as in two or three payments over the next couple of months.
There is also an option known as a short refinance. In this instance, the mortgage company may forgive some of the debt, reducing the amount of principal due back, while also refinancing that new amount into a new loan with new terms.
The three options noted above tend to get a borrower back on track more quickly and less painfully than some of the other options that are more damaging to credit.