The Truth About Foreclosure
When a person has a mortgage on a home and can no longer make payments for one reason or another, often the result is foreclosure. Foreclosure is when the bank or company that offered the mortgage on the home takes the home away from the mortgage holder because of their inability to make payments.
Foreclosures can seem complicated since there are so many different terms associated with them. Real estate agents and loan officers might know these terms like the back of their hands, but to the rest of us, it would be easy to get confused when terms start to be used.
Lien holder is another term important to understand as it relates to foreclosure. The lender, usually a bank or credit union, gives you money to finance your purchase of the home. This means there is a lien on the home. In truth, the lien holder has the power to take back the home, or foreclose on it, if you don't keep your contractual obligations.
Acceleration is another term you will hear in association with foreclosure. When something accelerates, it speeds up. Acceleration is the term used to describe the action of speeding up your loan repayment. If you are failing to make payments on the mortgage, the lien holder can accelerate the terms of the loan and require the entire loan amount be paid back.
If you are behind on payments, and there is an acceleration clause in your mortgage, the lien holder can decide to accelerate your mortgage and require you pay the full amount or the home will be foreclosed. If there weren't an acceleration clause, technically if you failed to make payments, the mortgage holder could really only hold you accountable for what you haven't paid, not the full amount you owe on the home. They would have to wait until payments became due.
Default is another term often associated with foreclosure. Default refers to the lack of payments on time and in full to the mortgage. This means that the borrower failed to stick to the terms and conditions of the loan and therefore defaulted on their payments and the loan. Default often leads to foreclosure of the home.
Even though foreclosure can seem like a tedious concept to understand, knowing these terms will help you navigate your way through and hopefully even avoid foreclosure. Understanding the terms will help you be able to communicate better with your lien holder so you feel like you are not left in the dark.
Foreclosures can seem complicated since there are so many different terms associated with them. Real estate agents and loan officers might know these terms like the back of their hands, but to the rest of us, it would be easy to get confused when terms start to be used.
Lien holder is another term important to understand as it relates to foreclosure. The lender, usually a bank or credit union, gives you money to finance your purchase of the home. This means there is a lien on the home. In truth, the lien holder has the power to take back the home, or foreclose on it, if you don't keep your contractual obligations.
Acceleration is another term you will hear in association with foreclosure. When something accelerates, it speeds up. Acceleration is the term used to describe the action of speeding up your loan repayment. If you are failing to make payments on the mortgage, the lien holder can accelerate the terms of the loan and require the entire loan amount be paid back.
If you are behind on payments, and there is an acceleration clause in your mortgage, the lien holder can decide to accelerate your mortgage and require you pay the full amount or the home will be foreclosed. If there weren't an acceleration clause, technically if you failed to make payments, the mortgage holder could really only hold you accountable for what you haven't paid, not the full amount you owe on the home. They would have to wait until payments became due.
Default is another term often associated with foreclosure. Default refers to the lack of payments on time and in full to the mortgage. This means that the borrower failed to stick to the terms and conditions of the loan and therefore defaulted on their payments and the loan. Default often leads to foreclosure of the home.
Even though foreclosure can seem like a tedious concept to understand, knowing these terms will help you navigate your way through and hopefully even avoid foreclosure. Understanding the terms will help you be able to communicate better with your lien holder so you feel like you are not left in the dark.
posted by Credit Counseling at
11:04 PM
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