Foreclosure Alternatives to Save Your Home from Foreclosure


Foreclosure Alternatives to Save Your Home from Foreclosure

Losing your home to forclosure is scary. I get it — I’ve been thier. When you fall behind on your mortgage payments, the bank can take your house through something called “forclosure.” It’s a legal process where the bank sells your house to get their money back.

But don’t panic! You have options. The bank doesn’t want to foreclose on you — it’s a hassle for them too. So they may be willing to work with you. There are alternatives to foreclosure that could help you keep your home, or at least avoid foreclosure and buy some time.

In this article, I’ll walk through the most common alternatives to foreclosure and whether they might work for you. I’m not a lawyer, but I’ve been through this process myself, so I’ll share what I learned. The sooner you take action, the more options you’ll have!


Forbearance temporarily pauses or reduces your mortgage payments for a set time. It gives you a break so you can get back on your feet. At the end of the forbearance period, you’ll owe the missed payments in a lump sum, set up a repayment plan, or roll the balance into a modified loan.

To get forbearance, you’ll need to contact your mortgage servicer (the company you make payments to) and submit a forbearance request. Explain your situation — maybe you lost your job or had high medical bills. Ask for their forbearance program.

Forbearance can last up to 12 months. And some forbearance programs are available without proof of hardship during COVID-19. This pause on payments can help if you’re in a temporary bind but expect to recover. But you’ll still owe the money later, so it just buys time.


  • Pauses payments temporarily
  • Avoids foreclosure during forbearance period
  • Gives you time to improve your financial situation


  • You still owe the money later
  • Interest and fees keep accruing
  • Need to qualify and submit request

Repayment Plan

With a repayment plan, you repay your missed mortgage payments together with your regular monthly payments over an extended time. This means making higher monthly payments over the next year or so until you catch up.

To set up a repayment plan, ask your mortgage servicer. Explain that you can’t afford the lump sum but could repay over time. They may agree to take your extra payments each month. Make sure the new payment is affordable — you don’t want to fall behind again!


  • Lets you catch up gradually
  • Avoids foreclosure
  • No lump sum payment needed


  • Higher monthly payments
  • Need to qualify and get servicer agreement
  • Could fall behind again if payments too high

Loan Modification

A loan modification permanently changes the terms of your mortgage to make it more affordable. It could lower your interest rate, extend the repayment term, or reduce the principal balance owed. This makes your payments smaller so you can afford them.

To get a modification, apply through your mortgage servicer. You’ll submit financial documents to show hardship and that you still can’t afford your current payment. If approved, you’ll sign modified loan terms. Modifications can take 30-90 days to complete.


  • Makes loan permanently more affordable
  • Lowers monthly payment
  • Avoids foreclosure


  • Need to prove financial hardship
  • Waiting period for approval
  • Could be denied


With a refinance, you take out a new mortgage loan to pay off your existing one. You could get a lower interest rate or longer repayment term to reduce your payments. Closing costs apply, but can sometimes be rolled into the new loan.

Refinancing is easier if you have equity, good credit, and stable income. But some lenders offer streamlined “cash-out” refis specifically for struggling homeowners. Shop around to see if refinancing could create an affordable payment for you.


  • Could significantly lower payments
  • Lets you tap home equity if needed
  • Avoids foreclosure if new loan is affordable


  • Closing costs and fees
  • Need equity and good credit
  • New loan terms could be worse if not careful

Short Sale

In a short sale, you sell your home yourself and the lender agrees to accept less than the full mortgage balance. This avoids foreclosure and lets you move on. Lenders often agree because a short sale is faster than foreclosing.

Your lender must approve the short sale terms. You’ll need to list the home and get an offer, then submit the offer and closing documents to the lender for approval. It can take several months to complete a short sale. This option works if you can’t catch up and need to move.


  • Lets you avoid foreclosure
  • No remaining mortgage balance
  • Allows you to move on


  • Credit damage from mortgage deficiency
  • No proceeds from home sale
  • Need lender approval

Deed in Lieu of Foreclosure

Also called a “voluntary foreclosure.” With a deed in lieu, you voluntarily sign your property over to the lender to satisfy the mortgage debt. This lets you avoid the foreclosure process. Lenders often accept it because it’s faster and cheaper than foreclosing.

Your lender isn’t obligated to accept a deed in lieu. You’ll need to submit financials showing you can’t catch up, then sign documents transferring ownership. You may be liable for any difference between mortgage balance and home value. Vacating quickly is usually required.


  • Avoids foreclosure
  • Typically no remaining mortgage deficiency
  • Allows you to move on


  • Credit damage
  • Lose home with no proceeds
  • Need lender approval


Filing Chapter 7 or Chapter 13 bankruptcy stops a foreclosure while debts are restructured or discharged. Chapter 13 lets you catch up late payments through a repayment plan over 3-5 years. Chapter 7 wipes out debt, but you may lose the home.

Bankruptcy provides temporary protection from foreclosure. But it damages your credit and could still result in surrendering the home. Still, it gives you time and legal options. Seek legal advice to explore if bankruptcy could prevent foreclosure.


  • Stops foreclosure during bankruptcy
  • Eliminates unsecured debt (Chapter 7)
  • Lets you catch up late payments (Chapter 13)


  • Credit damage
  • Legal complexity
  • Could still lose home

Sell Your House

Selling your home yourself lets you avoid foreclosure and walk away. If you have enough equity, you may pocket some cash. And you get a clean slate without debt. List your house with an agent at a competitive price. Or consider owner financing to attract buyers.

Selling is easiest if you have equity. But even a short sale is better than foreclosure. And home values often rise over time, so check your equity again. Selling your house yourself takes time but lets you control the terms.


  • Avoids foreclosure
  • Lets you walk away debt-free
  • Can get cash if you have equity


  • No longer own the home
  • Need to move quickly
  • Won’t work if you’re underwater

Rent the Property

Renting your home can generate income to pay the mortgage. Consider renting part or all of the house. Screen tenants carefully and consult a lawyer to draft a rental agreement. You’re still responsible for mortgage, taxes, and maintenance. But extra rent funds help avoid falling behind.

Renting works best for a temporary gap in income, or if you’ve moved but can’t sell yet. It produces income to stay current on payments. But you take on landlord duties. And most lenders require approval to rent – check your loan terms.


  • Generates income to pay mortgage
  • Could cover just a portion of home
  • Avoids foreclosure during rental period


  • Need to qualify tenants and draft rental docs
  • Still responsible for taxes, insurance, maintenance
  • Lender may not allow renting

Take Legal Action

If talking to your lender doesn’t work, you may need to take legal action to fight foreclosure. Consult a real estate attorney about your options. Some steps could include:

  • Filing for bankruptcy – This stops foreclosure proceedings while debts are restructured.
  • Going to foreclosure mediation – A neutral third party helps you negotiate with the lender.
  • Contesting the foreclosure – You may find errors in the foreclosure process you can challenge in court.
  • Suing for mortgage fraud – If you were misled about loan terms, you may have legal recourse.

Legal action takes time and money but gives you leverage against the lender. Especially look for procedural errors in the foreclosure process. An attorney can advise if litigation could help postpone or stop the foreclosure.


  • Can potentially stop or delay foreclosure
  • Legal leverage against the lender
  • Chance to negotiate alternative options


  • Cost and complexity of litigation
  • No guarantee of preventing foreclosure
  • Process can take months

Walk Away

As a last resort, you may need to accept foreclosure and walk away from the home. This damages your credit and finances, but may be necessary if no other options exist. The foreclosure process varies by state but can take 6 months to 2 years.

Try every alternative first. But if you have no equity and can’t afford payments, walking away may be your only feasible option. This frees you from mortgage debt, but ruins your credit. Prepare your finances, find housing, and know the process before choosing to walk away.


  • Frees you from unaffordable mortgage debt
  • Allows you to start over after a clean break
  • Foreclosure process takes time to complete


  • Severe damage to credit score
  • Lose home and equity in it
  • Emotional impact of giving up home

Get Help

You don’t need to navigate foreclosure alone. Reach out for help from non-profit housing counselors. They can assess your situation, explain options, and even negotiate with your lender. Here are some places to turn to:

You may feel ashamed or scared, but remember it’s not your fault. Reach out for support and take it step by step. With help, you can assess all your options and make the best decision for your situation.

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