Do You Lose Everything in a Foreclosure?
With foreclosure, there are so many questions and usually your lender is very reluctant to provide any answers. That’s what we’re here for. To help you fight back and keep your home but also to educate you on the foreclosure process so you know your rights and can do everything in your power to protect them.
One big question many homeowners have when it comes to foreclosure is its impact on equity. Will you lose everything with a foreclosure? The answer to that question is a hard no. Equity remains yours even in foreclosure.
What is equity?
Equity is your ownership stake in the property. It’s calculated by taking the difference between the current market value of your home and the amount of money you still owe on it. As you pay down your loan, your share of equity increases until you’ve paid off the entirety of the loan.
Factors that can affect equity during foreclosure
While what you own on your home cannot be taken away, there are factors that cut into your equity during foreclosure, and it starts with fees. Before foreclosure even begins, you may face late-payment penalties that get added to your total loan amount. Your lender may also charge other penalties and fees related to the foreclosure process.
Additionally, when a home goes into foreclosure, it will be appraised to assess its current market value prior to the lender selling it at auction. Often the lender will accept a low appraisal so the home will sell more quickly, but that lower appraisal value means that your equity will also be reduced. With a lower market value, the home will sell for less and there will be less money remaining after the loan and fees have been paid.
The equity you have built in your home is yours to keep, even with foreclosure, but those funds may dwindle quickly depending on what you owe in fees and the current appraised market value of your home
Before your home is lost to foreclosure, it’s important to remember that you have options. You may consider a loan modification, seek forbearance, attempt to refinance your loan, or even sell the home yourself during pre-foreclosure. If you have questions about foreclosure or are facing a Florida foreclosure, contact our team to schedule a confidential case evaluation.