Behind on Buying a House on Contract
I am behind on payments for my house on contract. What are my options?
Are you struggling to keep up with payments for your house on contract? Missing payments may seem like the end of the world, but options are still available if you have trouble making the contract’s payments. It’s essential to know your options when you are behind on a home being bought on a contract.
House Purchased on Contract: The Importance of Equity
Before discussing the options available if you have fallen behind on payments, let’s talk about the importance of equity. Home equity is the difference between a homeowner’s property’s market value and the outstanding loan balance. This is the part of the home you own “paid in full.” It represents the owner’s financial stake in their residence (how much value you own personally minus the contract amount). If you have been in the home for many years before defaulting on the payments, there is a good chance that you have some equity in the house.
You have more protection and options when you have equity on a home contract. First, your house may be protected by the foreclosure process if you have equity. Some newer contracts can be canceled simply, sometimes through a contract action and just an eviction. However, most states are now offering higher protection to people who have bought homes on a contract that has “substantial equity.” If you are found to have substantial equity, your creditor must now file a foreclosure action. The foreclosure action takes a considerable time to accomplish. You also may recover funds for the property even if the case goes to a sheriff’s sale.
House Purchased on Contract: No Equity on House Options
If you have fallen behind on payments and don’t have equity in the home, you may have fewer options. You can always certainly sell the house if you have enough time or an agreement to get to closing. Also, you may be able to just surrender the home back directly to the lender in exchange for not pursuing any debt afterward. You can always file Chapter 13 also to keep the contract current.
House Purchased on Contract: Equity on House Options
If you have equity in the home, you have more options when you are behind. You can almost always take the home to a sale and make money from the contract. Remember to respond to all court attempts to return the house to protect your investment.
In addition, you may be able to get the house refinanced earlier to buy out the contract. If the house has substantial equity, getting a mortgage should be easier. The property would be sufficiently secured with the extra equity.
Chapter 13 is an excellent option if you have equity in the house and desire to keep living in it. Chapter 13 would delay any foreclosure or other action. In addition, all payments could be restructured in Chapter 13 to bring your house back up to date.
Buying a house on a contract can be a powerful tool in finding a home. It can also be a powerful tool sometimes for investment. If you are behind when buying on contract, know your options early. Make sure to protect your home’s investment.
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