If you're experiencing financial hardship, and are struggling to meet the repayments on your home mortgage, it's critical that you take action to prevent foreclosure as soon as possible. Being driven out of your own home is one of the worst things that could happen to you... made even more tragic if it could have been prevented.

To start though, let me explain what happens when a home goes into foreclosure. As you know, lenders make home loans out to people on the condition that the home is security for the loan. The idea is that if the home owners default on their loan, the lender will be able to sell the property in order to recover the loan amount. That being the case, when the lender is satisfied that a home owner is in default, they will issue a notice that foreclosure proceedings have commenced and that the home owner must repay all outstanding amounts by a certain date. If the home owner can't pay back this money, your home will end up being sold to the highest bidder at public auction.

The best way to prevent foreclosure is to stop foreclosure proceedings from being started. This means recognizing the warning bells that foreclosure might be on the horizon. For example, if you're having difficulty meeting a monthly repayment, that's a clear indication of trouble.

You want to be sure that your current financial difficulty isn't temporary. If it's due to a huge unexpected liability, you may otherwise be able to meet your ongoing obligations. At the same time, you ideally want to be able to comfortably meet your mortgage obligations despite the occasional setback. Now is the time to make any tough choices that need to be made about curbing spending on non-essential expenses. Also, if there are unused assets that can be sold - e.g. an automobile that isn't being used very often - it's probably wise to sell them and keep the proceeds as a safety cushion in case you experience further financial hardship.

Nevertheless, if your current financial hardship isn't likely to be temporary, you have nothing to gain - and a home to lose - if you don't face facts. If you want to prevent foreclosure, it's essential that you contact your lender as soon as possible in order to discuss you situation.

Be co-operative with your lender and open to ideas about how you might retain your mortgage. Your lender may work with you to come up with a new budget, and suggest some options for enabling you to keep your home. These options may include:

1. Agreeing to an alternative repayment plan.

2. Forgiving a payment.

3. Allowing you to meet the unpaid amounts by adding extra amounts to you current repayments until the outstanding amounts are paid.

4. Changing the terms of the loan agreement - e.g. by adjusting the interest rate, extending the term (and reducing the sum of the repayments), etc.

5. Refinancing the loan - i.e. increasing the balance of your loan to include the unpaid amounts, and re-amortizing the loan.

6. Issuing a separate loan to cover the unpaid amounts.

If none of these options is available to prevent foreclosure, and it's likely that your home will be foreclosed, you should still co-operate with the lender.

At the same time, make sure you fully understand your right and obligations. You should know the terms of your loan back-to-front and be well-appraised of the foreclosure process. For example, one way of stopping the foreclosure proceedings is to sell the house and pay back the loan.

Even if you don't think you can prevent foreclosure, don't close your mind to the alternatives available to you. You may well be able to stop losing your home by just being pro-active about your situation.

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