If you are someone who fears facing foreclosure, you have probably heard of a term ‘short refinance’. How many of you actually know what a short refinance is, and is this a good option?
A short refinance is a term that means mortgage refinancing by a lender. It is done when a lender, usually a homeowner, is in default on their monthly payments. This is done to help the homeowner avoid foreclosure.
This new loan is usually smaller compared to the already existing loan mount. It isn’t rare for the lender to even forgive the difference. Even though this will leave the bank with less money, it’s still less costly compared to a foreclosure. This is the main reason why your lender may opt to allow short refinancing rather than to leave you lose your house.
Why Would Your Lender Choose a Short Refinance?
If you have missed four to six mortgage payments, the bank might foreclose on your home. A mortgage is a special kind of loan you take for the purchase of your real estate that you are obliged to pay back. This means you don’t have to pay for your property in cash, but rather you pay it over time. The payments are pre-determined, and you also have to pay the interest.
If something happens and you can’t pay your loan in time, it goes into the default. When this happens, it’s all up to lender. There are several options that may occur, but the most common – and most feared one – is foreclosure. This means the lender now owns your property, and you will be given a short amount of time to evict your property. You’ll also be left with damaged credit, and a huge financial loss. At the same time, foreclosure is an expensive process that isn’t the best choice for your lender, as well. Not only will they have to pay for taxes and court fees, but they might end up waiting up to a year before they receive any payments. This is why many lenders decide on some alternative method, and short refinance is one of them.
You, as a borrower, might also ask for a short refinance. This way, you will keep your property and your debt will be reduced. However, you should keep in mind that your credit score will significantly drop, as you won’t be paying the entire debt. This is why you may want to check some other options, as well.
What Is the Best Option to Prevent Foreclosure?
A short refinance is one of several options you have when you’re trying to prevent foreclosure. It’s cost-effective for both you and the lender. Another good option is a forbearance agreement, which is a temporary postponement of your mortgage payments. This is another good option, and the terms of forbearance are negotiated between the lender and the borrower.
Another option that is good for both you and your lender is a deed in lieu of foreclosure. This option will allow you to deed the property, or to give it up, to the bank, which will in return release you from your debt.
You can also choose to sell your house to a direct buyer as a quick way to get rid of the property that is giving you trouble. The best way to stop foreclosure of your house in Milwaukee is to make a fast and direct sale. Sparks Property Investors LLC is a professional buyer in Milwaukee that will help you make a quick sale of your house, which will stop the bank and thus save your credit. This includes providing fair solutions that will make sense and actually work. Sure, you may not receive the retail price, but you’ll be able to sell in just a few days. This will help you cut on holding costs. Also, we will buy your house as is, so you won’t have any repair costs as well. Giving away your home is a difficult choice, but it’s better to lose it this way than to have someone forcefully take over your property.
If the foreclosure has already begun, you can try to negotiate a short sale of your house, as well. The best time for a short sale is the time period when you realize you are unable to make your payments as outlined in your loan agreement, and before the lender files legal action against you and officially owns your house. You will be able to list your house on the market and try to get an offer that will satisfy the balance of your loan or get really close to it. This might be a difficult process because you will have to be in constant communication with the lender about the offers you receive and will have to wait for them to approve or counter offer the offers you receive. If you do have an offer that the bank is willing to accept, selling your Milwaukee house to that buyer would relieve you of some of the credit damage of having a foreclosure, although it would still negatively affect your credit.