The Effects of Foreclosure
For any home owner facing the threat of foreclosure,
he or she should carefully consider every options before allowing the home
to go to the mortgage company. Foreclosure has long lasting effects
that can haunt a person for years down the road. Besides the obvious
fact that a home owner will lose his or her house, there are other
ramifications that will affect someone facing foreclosure including
emotional and financial burdens.
The most common effects of foreclosure are:
1) losing the home.
2) losing all saved equity and appreciation in the
home. Homes increase in value each year (in most cases). The
longer a person lives in a home, the more the home's value
increases. In addition, the more payments a person makes on a
mortgage, the more he or she decreases the balance owed against the
home. In many cases the combination of the equity and appreciation
can translate into the home owner losing thousands of dollars.
3) increased taxes. A lender that loses money
from the sale of a foreclosed home must report the loss to the IRS.
Subsequently, the IRS may require the previous owner to report the
lender's loss as income on his or her next tax return and pay taxes on it.
4) inability to borrow money in the future. The
most serious consequence facing a home owner is the immediate destruction
of his or her credit profile. A foreclosure is a serious derogatory
that will label a person as unworthy for credit. This derogatory
remains on the credit report for at least 7 years. The result may be
declined applications for credit, the inability to rent an apartment, not
qualifying for employment, and a host of other implications for the
person.
5) lawsuits. Though Arizona has anti-deficiency
laws designed to protect home owners from lawsuits from lenders and other
lien holders, a company may still be able to file a lawsuit for damages in
some situations.
6) loss of employment. Some employers require
their employees to maintain good credit histories. Notification of a
foreclosure may be grounds for an employer to fire the person from his or
her job.
7) loss of self-esteem. Emotionally the stress
of foreclosure may have serious effects upon a person. The loss of
his or her home may lead to depression, loss of self-esteem, embarrassment
around family, friends, and others.
There are options when facing foreclosure. Free
help and assistance is available for home owners facing the possibility of
foreclosure. If you would like to talk with someone about your
situation, click here.
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