When a homeowner fails to pay in full the principal amount and interest on a mortgage, the lender will have the right to seize the property, evict the owner, and sell the home as stipulated on the contract.
When a homeowner defaults a single month of mortgage repayment, they will receive a notification from the lending company or bank. Three to six months of defaulting a payment will render the homeowner as delinquent. If the borrower or homeowner fails to make up for the missed payments within the grace period, the lender will have to put the collateral, which is usually a house, for closure.
The longer the borrower falls behind with payments, the more difficult it would be to catch up since there are additional fees for every late payment of up to 15 days.
Why Do Homeowners Go Into Foreclosure?
There are various reasons that owners stop making repayments, although most of them would not have their property foreclosed voluntarily. Some of these reasons are:
- Getting laid off or fired
- Quitting the job
- Inability to continue employment due to medical reasons
- Growing bill obligations and too much debt
- Disputes with co-owner and divorce
- Job transfer to another city or state
- Unaffordable maintenance issues
From 2005 to 2011, many homeowners left their homes due to the market crash. Since the property values were falling, they owed lenders more than the actual worth at that time. Although closure was not the best solution, it provided relief for most of the homeowners.
How to Avoid Closure?
For those who are buying homes for the first-time, the following suggestions will help mitigate risk:
- Learn the basics of real estate investing
- Discover the art of managing a portfolio
- Uncovering the secrets of reducing risk
With these fundamentals, homeowners will know how to make smart decisions and avoid having their properties put into closure.