The pros and cons of foreclosure
Posted
May 19 2008, 07:35 PM
by
Karen Datko
Just how bad is foreclosure? As the "Silicon Valley Blogger" points out, pretty awful. But it might just be the end to a financial nightmare that's keeping you up at night.
If faced with the prospect of foreclosure, the important thing is that you understand the consequences -- and there will be some -- of this huge financial step.
In a post at The Digerati Life, SVB explains what can be gained and lost if you mail your house keys to the bank.
Among the benefits: Some states don't allow the lender to come after you for additional money once you walk away from your home. Also, a decision to opt for foreclosure may actually give you some bargaining power with the lender. Rather than take the financial hit of foreclosure, the lender may choose to modify your loan.
On the other hand, a foreclosure will be on your credit report for seven years, making it more difficult to get credit or buy another home. You also may end up owing the tax man. (And, we might add, many experts consider foreclosure worse for your finances than bankruptcy, which, SVB notes, is a "different animal altogether.")
Overall, her arguments lean toward accepting foreclosure only as a last resort. "There are many more options you can consider before taking the radical route," she writes. "By communicating with your bank or lender, you may find a better solution to your woes, one that is superior to foreclosure."
