Home isn’t just where the heart is, as the saying goes. It is also where people hold the vast majority of their personal wealth. The equity accrued in a residence can represent years of a person’s income and can be their most valuable asset.
Home equity begins with the down payment, increases with the principal amount paid with every mortgage payment and slowly grows due to property improvements. Changes in the market can also increase equity by increasing the market value of a home. That equity can be at risk if a lender chooses to foreclose on a house.
When is a homeowner vulnerable to foreclosure?
People must miss four consecutive payments
Mortgage lenders are subject to strict federal rules that aim to protect homeownership from frivolous and aggressive foreclosures. Typically, mortgage lenders cannot foreclose until property owners have missed four back-to-back mortgage payments.
Of course, to bring the loan back into good standing, those who have fallen behind on their mortgages must make all of the missed payments. The larger the monthly payment amount, the harder it may be to catch up after falling behind on a mortgage.
Job loss, medical emergencies, divorce and other personal challenges can all put home equity at risk. Homeowners concerned about the possibility of foreclosure may benefit from learning about bankruptcy as a possible form of financial relief. They may also need to discuss options for foreclosure defense.
Speaking with an attorney is a smart move for anyone who has received foreclosure notices from their mortgage lender. Accurate information about foreclosure rules and proceedings can help people protect their most valuable assets.