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The process of foreclosure is something that no one ever wants to go through. However, millions of people are faced with this problem every single year. In some cases, it may be in your best interest to allow a property to go into foreclosure. Here are some situations where foreclosure is the best option.
1. Declining Value
One of the most common scenarios where foreclosure is considered is if a property declines in value significantly. This will typically happen whenever the real estate market goes through down period in the market. When property values decline, it puts homeowners upside down on their mortgages. This means that even if the homeowner were to sell their property, they would still own a significant amount of money on their mortgage. Instead of staying in the property and waiting for the real estate market to rebound, which could take years, it may be to your advantage to consider going through a foreclosure. You can simply walk away from the property without waiting on the real estate market to turn around.
2. Build Up Money
If you are already behind on your mortgage payments and you do not have any money to work with, it may be to your advantage to go ahead and go through foreclosure. By doing this, you will be able to stay in your house for several months without making any payments. In some cases, you can live in a house for up to a year before they officially kick you out. This means that you will be able to save several mortgage payments during that amount time, so that you will have some money saved up for when you move forward. Although your credit will be damaged, you will be able to come up with some significant savings to help you in other areas.
3. Need to Move
Sometimes, people need to suddenly move to another part of the country. When this happens, they may have to sell their home quickly. If the house does not sell, it could sit on the market for an extended period of time. By that time, you may already need to be moved to a new location and find a new place to live. If you are trying to keep up with two housing payments, it can be a huge financial strain. Instead of killing yourself financially, you might want to consider letting your home go to foreclosure. You will then be able to focus on your new housing situation and forget about the old one.
4. Choosing between Foreclosure or Bankruptcy
If you are in serious financial trouble, you might find yourself choosing between foreclosure or bankruptcy. A bankruptcy will stay on your credit report for 10 years where they foreclosure will be on your report for seven years. If it is not important for you to purchase another house for at least seven years, you might want to consider going with foreclosure instead of bankruptcy so other areas of your credit will stay intact.
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- What To Do When Mortgages Default
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- Alternatives to Getting a 2nd Mortgage