What is Foreclosure?
Foreclosure is a legal process where your home is put up for sale by the lender. It happens when your home is used as a collateral for a mortgage, but you default and aren’t able to pay back.
Then the lender can foreclose your home to recoup the remaining loan amount with the money generated by the sale of your property.
Who takes the decision to Foreclose?
After you default on mortgage payments, the bank or financial institution that lent you the money for your home decides if and when to foreclose.
Are there any negative consequences of a Foreclosure?
The biggest drawback of a foreclosure is that you end up losing your home, and all the home equity you might have built over time.
Foreclosure also has a huge impact on your credit report and score, making it very difficult to get other loans after a foreclosure.
What if the foreclosure generates more money than the amount left on my mortgage?
If the sale of your home generates more money than the balance remaining on your mortgage, the extra amount is yours to keep. The lender only takes the amount of the loan you haven’t paid off.
What if the sale generates less money than the mortgage balance?
If the Foreclosure doesn’t make enough money to pay off the outstanding balance, you still owe the lender the difference.
How can I prevent Foreclosure?
There are 2 ways to prevent a foreclosure – either by renegotiating the mortgage repayment terms with your lender, or by declaring bankruptcy.