There are few financial situations that can be as damaging to one’s economic future as foreclosure. While the dream of home ownership is a powerful and exciting one, the fear of foreclosure is just as strong, because it takes that dream that a person or family has accomplished away from them – and almost certainly ensures that they will have to go as long as a decade to experience that dream again. No one buys a home and takes out a mortgage planning to default on that loan and go into foreclosure, and the paralysis that this experience can cause often leads people to procrastinate, putting off chance after chance until they lose their home and end up with nothing but a ruined credit report.
One factor that can save your credit score, even if you have entered a delinquency phase in your mortgage, has to do with the amount of equity you have established in your home. If you have paid on the mortgage for several years, you may have built up a considerable amount of equity. If you have kept your home in solid condition, its value (along with the equity) may allow you to find a private lender who can help you out by refinancing your loan and satisfying the mortgage that is currently in default. You’ll have to have a solid strategy in place to pay the private lender back, but one benefit is that many of the private loans out there only require interest-only payments over the course of the loan. The smaller payment will provide you the ability to get your affairs in order so that you can put yourself in the best position to refinance and pay off the private mortgage loan before the end of term.
One major cost that you may not have thought about when it comes to foreclosure is the pile of legal bills that is likely to pile up. In a straightforward foreclosure, there are three attorneys involved, and that number can grow if there are other lienholders with claims on the property. For the purposes of this article, we will consider the three attorneys that are involved in even the most basic foreclosure proceeding.
Foreclosure Lawyer (representing the existing lender)
If the foreclosure drags out at all, this lawyer’s bill can easily run into five figures. Also remember that a Foreclosure Lawyer cannot provide you legal advice and is looking out for the best interest of their client.
Lender Refinance Lawyer (representing the private lender)
At a minimum, you can count on this lawyer costing between $1800 and $2800. This attorney puts together the paperwork and secures the interests of the private lender. Even though this attorney represents the private lender, you as the property owner pay the fees.
Borrower Refinance Lawyer (representing the property owner)
The minimum fees for this lawyer will run between $750 and $1000. This lawyer will review the paperwork and represent your interests in the case. This lawyer should also provide independent legal advice for you throughout the transaction. If you dispute the lender’s Statement of Claim, though, you might want to hire an additional lawyer to represent your interests.
If you find that you are in default on a mortgage, there are some creative ways to avoid the permanent damage to your credit report. A mortgage broker that has the experience and the credibility can find you a private lender who will approve your applications or will suggest, in a worst-case scenario, that you sell your property, whether on the open market, to a family member or to an investor.
This isn’t the end of your fees, though. There are fees to pay your broker, fees to pay for originating the private loan, and you may also owe back taxes on the property. Your home equity can cover these costs, if there is enough of it remaining in the property, so you won’t have to write that check.
Does this situation sound like yours? Reach out to Amansad Financial to see if we can help. We have found solutions for many Canadians in this exact situation, and we look forward to helping you as well. Don’t procrastinate any further – the longer you wait in a default situation on a mortgage, the less time you have to take advantage of solutions like private lenders.
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