Second mortgage loans and credit lines can be ideal cash out tools for avoiding a foreclosure. As you know it’s hard to qualify for a mortgage if you are late on your bills. It’s also hard to secure other lines of credit, and your credit scores will suffer–late payments stay on your credit reports for 7 years and bankruptcies are there for 10 years. Plus, employers run credit reports before offering jobs, and an increasing number of insurance agencies are basing policy premiums on your credit scores.
Is a Second Mortgage a Good Idea to Have for an Emergency Credit Lines?
The worst bill to be late on is your house payment because you could lose your home. And, foreclosure is nothing to take lightly. The risk of foreclosure grew 10.2 percent nationwide, according to San Juan Capistrano, CA-based HomeSmartReports. Responsible Lending, predicting as many as 2.2 million foreclosures in the next few years from the subprime sector alone, says it could get a lot worse. What most people aren’t aware of is that if they foreclose, they get a big, fat tax bill for the forgiven debt. This is another reason you should take action right away if you think you’re going to be late on your house payment.
The first thing you should do is to be honest with your lender. Meet with them at the first sign of trouble and be honest about impending difficulties. If the default is caused by a temporary condition likely to end within 60 days, the lender may consider granting “temporary indulgence.” But, the lender will want documented evidence before granting indulgence. If the homeowner has a good payment record, the lender may also suspend payments or allow the borrower to make reduced payments for a specific period of time (typically 12 to 18 months) through a forbearance plan.
How about a equity home loan?
The Federal Reserve cut the discount rate by half a percentage point, so now may be a good time to consider a home equity line of credit or fixed-rate second mortgage loan to consolidate your debts and free up the money needed to continue making your house payments in a timely manner.
This could help you avoid foreclosure and bankruptcy. It will also reduce your debt ratio and could quickly increase your credit scores, provided that you don’t run up your credit cards again.
Property values invariably go up and down over time, credit scores rise and fall, interest rates rise and fall… Get a second mortgage now while the rates are low, payments are affordable and while you qualify with a good credit score. 2nd mortgages are better than hard money refinancing for foreclosure prevention, avoiding loan payment defaults and avoiding bankruptcy, so talk with a lender today. Article was written by Maria Ny.
