Stay out of foreclosure with a deed in lieu arrangement

On Behalf of | Jan 24, 2021 | Firm News |

Missing mortgage payments can leave you with ruined credit, substantial debt and reduced resources unless you can take advantage of foreclosure alternatives. While you may consider a Michigan short sale or bankruptcy, they are not your only options. 

According to Bankrate, a deed in lieu of foreclosure involves a process that transfers your home’s title to the lender, releasing you from your mortgage debt. 

Advantages of a deed in lieu arrangement

You may negotiate the deficiency between your home’s fair market value and the loan, under certain conditions. In many cases, it becomes a “cash for keys” arrangement. This means the lender helps you move and find a new place to live in exchange for turning over the property in good condition, quickly. While your credit score may take a hit, it’s not as severe as declaring bankruptcy. 

Difference between foreclosure and deed in lieu

When you become late paying mortgage payments, the lender often starts the foreclosure process, which means taking back the unpaid property. The bank may seize the home and sell it to recoup its investment. A deed in lieu means your lender understands that you cannot make loan payments and lets you walk away from the property. 

Your lender can reject a deed in lieu arrangement for several reasons. 

  • The home value depreciated below the loan amount 
  • Liens of tax judgments exist on the property 
  • Your home is in poor condition 
  • Beneficial government incentives if the lender forecloses 

If you can no longer make mortgage payments, a deed in lieu of foreclosure can help you avoid litigation, saving you and the bank money and time. Negotiating with the lender is often tricky. When done correctly, you may walk away from your home quickly and with no further financial requirements. Learn more about foreclosure alternatives here.