If you are in default and nothing else you've looked at will stop the foreclosure of your home, then you may want to consider a Deed in Lieu of Foreclosure. This article talks about what a deed in lieu is, what its benefits are and when or who should use it. After reading this article, you will have a better idea if this is what you should do in your situation.

What Is A Deed In Lieu of Foreclosure?

In a deed in lieu of foreclosure, you voluntarily transfer title to your property to your loan servicer or lender. In return, you ask your lender to cancel the remainder of the mortgage you owe. Some lenders first require that you try to sell your home within 90 days before they consider this as an option. The drawback is that you may lose the equity in your home and you may owe taxes on the amount of the debt forgiven. If you have other loans or obligations secured by your property, then this may not be an option for you. Although drawbacks exist, the good news is there are some advantages.

What Are Its Advantages?

When your loan servicer accepts your deed in lieu of foreclosure, it will stop the foreclosure of your property. You will be free of any further financial obligations with them. It is a much better option than to do nothing and let the foreclosure proceed. Having a deed in lieu is easier on your credit history than if it has a foreclosure recorded. Although these are good advantages, this option isn't for every homeowner who is in default.

Is It For You?

Nobody wants to give up his or her home, especially if they have some equity built up in it... But for some homeowners, a deed in lieu of foreclosure is the only option they have. Perhaps their income has drop significantly that even a payment forbearance (suspension of payment until ready), can't help them. It's a drastic solution, but not as drastic as filing for bankruptcy. So this is not for you if you think your financial situation will improve sooner than when your lender thinks it may be time to foreclose.

Conclusion

When caught in difficult situations, sometimes we have to make some hard choices. I talked about what a deed in lieu of foreclosure is and how tough it would be to take that as an option. However, it's an option that isn't as negatively long lasting as bankruptcy on your credit records. Now that this article has informed you about the deed in lieu of foreclosure, it is something you can better discuss with your loan servicer.

Copyright © 2008 by Jackson Chan All Rights Reserved

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