Strategic default option comes into play when the borrower stops making their mortgage payments even when they can afford these. They usually stop doing so when the value of the properties decreases. There are some disadvantages of the strategic default option, like difficulty in getting a new loan, dropping of the credit score and other future housing related issues.
Therefore, they must consider other options to stop the foreclosure instead of the strategic default option.
Here are some ways to stop a foreclosure:
- Negotiate with the lender:
It is very important to explain your financial condition to your lender. Try to communicate with the lender in the best possible way and inform them about your situation. Make them confident that you will certainly do something about the situation as soon as possible.
- Borrow money:
Check the amount needed to prevent the foreclosure. You can borrow from your family or friends to stop the foreclosure for that time.
This is an agreement between the borrower and the lender in which the lender either temporarily suspends the payments or reduces the monthly payments for a specific period of time.
- Loan Modification:
The loan modification option is also available and for this, the concerned bank must be approached. You just need to explain your current situation and if the bank is convinced, they can make changes in your loan agreements. A loan modification professional can be of great help and can assist you with the whole process.
- Deed in Lieu:
In deed in Lieu, the homeowner or the borrower can transfer the ownership of the house to the lender by signing an agreement; thus relieving the borrower of all obligations. This can prevent the damage to the borrower’s credit score to a great extent.
- Deed for Lease:
This means that after transferring the ownership of the house, the buyer can again rent back the home. In this agreement, the homeowner can stay in the house on rent for a specific period of time.
- Sell the House:
If, in between the foreclosure process, the homeowner or the borrower receives an offer to sell the house, they can sell it at a price higher than the debt owned by the homeowner.