Pros of the Deed in Lieu of Foreclosure
There are many pros or advantages to a deed in lieu of foreclosure, particularly as an alternative to foreclosure itself. The following are some of the central benefits to a deed in lieu of foreclosure:
- Quicker way to avoid foreclosure and to move forward: When the bank agrees to a deed in lieu of foreclosure, you should expect the process to take anywhere from approximately 90 to 120 business days, which is significantly faster than a foreclosure and can allow you to move forward much more quickly with your life.
- Prevent additional financial harm: Once you decide on a deed in lieu of foreclosure, you will not risk missing additional mortgage payments, falling farther behind on your loan, or harming your credit any further. Although your credit will be affected by the mortgage payments you have missed, the impact to your credit will be significantly less than a foreclosure.
- Relocation assistance may be available: Depending upon the details of your case, you could be eligible to seek relocation assistance from your mortgage servicer if you go through with the deed in lieu of foreclosure and move out of your home. In some cases, you could be eligible to obtain up to $3,000 in relocation assistance for a conventional mortgage and up to $2,000 for an FHA loan.
- Remain in your property temporarily: Once the bank agrees to a deed in lieu of foreclosure, you can be eligible in some cases to remain in your home for one or more months, which can give you time to find another place to live while still avoiding foreclosure.
- Qualify sooner for a mortgage: If you choose a deed in lieu of foreclosure instead of your property going into foreclosure, you can qualify sooner for a mortgage and can buy another property once you get back on track with your finances.
What are some of the issues with a deed in lieu of foreclosure that may be disadvantages? Consider the following:
- Your credit report will be harmed (although not as much as it would be with a foreclosure);
- Deed in lieu of foreclosure can stay on your credit report for up to 7 years;
- You could owe money to the bank if the mortgage servicer gets a deficiency judgment against you, so it is important to ensure that the bank agrees to forgive any remaining debt you owe;
- You will owe income taxes on the debt that the bank has forgiven; and
- You will not be able to keep any equity in your home.
Do you have questions about a deed in lieu of foreclosure? An Oak Park foreclosure defense attorney is here to help. Contact the Emerson Law Firm today for more information.
See Related Blog Posts:
How Do I Complete a Short Sale?
Benefits of a Short Sale Instead of Foreclosure