If you default on your mortgage payments, Foreclosure law provides for the lender to take possession and sell your home. Once the home is sold, the lender will use the payment to pay off the balance of the loan and the new homeowner will buy their home free of the loan.
However, of the proceeds received do not pay off the loan in total, the lender will hold the borrower for the balance. Foreclosures can be costly for the lender. Therefore the lender will give the borrower as much time to pay off the loan.
Foreclosure law applies to individuals that want to borrow money to buy a home or those who want to borrow money to make home improvements. The bank will check your income and how many other loans you have taken to understand if you are eligible for a loan for the value requested. Most contracts will state that the lender will take possession of the collateral if payments are defaulted within a stipulated time.
If you are faced with foreclosure and want to keep your home, you have a few options. For one, you can buy your home upfront before the bank sells your home. If you speak to your lender, you can pay only the missed payments and penalties thereby reinstating the defaulted loan.
Most often the borrower will not have the funds to pay the loan off in full. Speak to your lender about forbearance. Forbearance means that the lender will suspend payments for an agreed time, giving the borrower time to work out how they will pay back the loan.