If you are facing foreclosure, it’s important to know your options. One of them, obtaining a deed in lieu of foreclosure, allows you to avoid the foreclosure process and its detrimental impact on your credit score.
What is a deed in lieu of foreclosure?
A deed in lieu of foreclosure allows a homeowner to directly transfer the title for their property to their lender. This offers them relief from the mortgage debt that they’ve racked up without having to go through the foreclosure process.
How a deed in lieu and a full foreclosure are different
One of the main differences that you’ll see with a deed in lieu of foreclosure is that it is less damaging for your credit history, especially your credit scores and reporting. Another thing that happens that is a big help at this time is your lender likely will release you from financial obligations. You wouldn’t need to make any further mortgage payments or pay the balance that’s left on your loan.
Consequences of setting up a deed in lieu of foreclosure
This action is taken as a means of avoiding foreclosure and usually is conducted as a last resort. Both parties benefit from getting a deed in lieu of foreclosure. The collateral property goes back to the lender so that the current owner no longer will have mortgage obligations. The lender and mortgage holder need to agree to the terms of this document.
When you’re about to lose your home, you’ll need to consider the impact on your financial health. Consider talking to your mortgage lender about a deed in lieu of foreclosure. This may be your best course of action.