Buying a property is one of the bigger decisions in life and it must be made with the utmost care. Despite the best-laid plans, things sometimes go wrong. If a borrower defaults on the mortgage payments, foreclosure is a lender's legal recourse to reclaim the property. It's hard to watch a relative or friend go through the process of losing her home, and you might want to help but are wondering how.
What Can Lead to Foreclosure
Many factors can contribute to bringing a homeowner to the threshold of foreclosure; unemployment, disability, losing a business and so many more. When disaster strikes and he is unable to make mortgage payments, the first thought he might have is, is there any way to get someone to take over the mortgage payments to avoid foreclosure?
Is It Legal?
If you are considering making mortgage payments for someone else, contact her lender with her. Lenders want to help because going the foreclosure route is expensive for them, and the FHA's Housing and Urban Development department requires lenders to work with the borrower to solve the problem. Moreover, lenders do have options that can help, provided the borrower is only two or three payments behind; anything more and your options are seriously limited. In all probability the best way forward might be for a friend, relative or investor to take over the mortgage payments to avoid foreclosure.
The important question to ask the lender is whether taking over the borrower's mortgage payments is legally allowed. Most mortgages, especially recent ones, are not assumable mortgages, and taking over the payments cannot be done. Another clause that can prevent anyone from taking over a mortgage is the "due-on-sale" clause, which means that the loan on the property becomes due when there is a transfer of ownership. This, in effect, would require any would-be rescuer to take out a brand new loan to pay off the old mortgage.
Some mortgages, however, are assumable and can be transferred. Check with your lender to see whether the homeowner qualifies for assistance from a relative, friend or investor to take over their payments.
Taking Over Mortgage Payments
Banks sometimes require a seller to rent out the property. You might help your friend or relative make his mortgage payments by renting his home for a specific time, allowing him to make the mortgage payments.
Sometimes, a lender can help by extending the home loan term, and once approved, the default payments are tacked on to the end of the loan term period.
Another option for someone facing foreclosure is to add you to the deed of their house. This allows you to make mortgage payments on behalf of the initial homeowner. There are creative financing in which the homeowner can go into a complete new mortgage with you as a co-signer or co-owner. This allows you to make the mortgage payments for them and he gets to stay in the house.
Contact an Attorney
If you decide to pursue helping your friend or relative, consult an attorney. An attorney who is well versed in foreclosure prevention can explain the legal aspects of assuming someone else's mortgage payments for a specific time frame or for the duration of the loan.