When it comes to loans and mortgages, people are often worried about foreclosure and want to know the process of foreclosure. Banks and other lending institutions have processes for foreclosures that they follow. If a person fails to repay the mortgage amount to the bank or any other financial institution, then the lender gets the right to sell the property and collect the dues after selling the property. The person who was paying the mortgage installments loses his rights from the property. This is how the process of foreclosure works.
When Does Actually Foreclosures Start?
Foreclosure and bankruptcy have become some of the well-known terms to the common men, after the economic crisis. A large number of people have faced foreclosure in the past two years since the recession started. Therefore, people who have accepted home mortgages or home loans from different financial institutions should also understand the process of foreclosure. This can also help them to save their property from being foreclosed.
If you are one of those, that are going through a tough financial condition and want to save your home from foreclosure, you should understand how foreclosure proceedings can affect you. The process of foreclosure actually starts as soon as a person fails to repay the loans of the financial institutions. However, it does not mean that your failure to make a single one payment would entitle the financial institution to start the foreclosure proceedings.
The financial institution that has given the mortgage loan will actually wait for sometime before they start the process of foreclosure. The creditors may give you 2-3-month time before they send you a notice of foreclosure. At this point, if you pay back the dues along with the late-payment fees, you can still save your house from being foreclosed. However, if you do not make a payment, then the property will be foreclosed.
How Does Lender Gets Money After Foreclosure?
After the foreclosure, the creditors will need to sell the property to recover the unpaid dues. This means that after the foreclosure proceedings, the property reverts back to the creditor. Always remember, that the home loan or the mortgage amount that the bank or any other financial institution has offered you is equal to the financial value of your house. In that sense, your house works as collateral against the mortgage loan. If you cannot repay the loan, the property will be sold again to recover the unpaid amount on the mortgage loan.
The creditors or the banks will then place the property to be sold at an auction. The starting price for the auction would usually be the un-recovered amount on the mortgage loan of the previous buyer. At the auctions to sell the foreclosed houses, the lenders not only get the due amount but also have the chances of making extra money from the property. Though in these times of recession, you may actually get a property for less than the original value. Since the creditors want to dispose off the foreclosed properties as soon as possible, it can be priced lower than the original value of the property. This is an excellent time for those who want to purchase property for investment purposes.