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they will sell the home and any profit over the loan payoff and expenses(which can add up quickly) goes to any other interested parties first, then finally to you. so if you have a 2nd or owe taxes those get paid first out of the sale before you can see anything. in the majority of cases, yes if it is foreclosed and you are unable to redeem it then you won't see a dime. it does vary by state, so this is just a very general answer.
My question is simple. If I take a 300k loan on a 400k hpuse. Assume I have paid 50k upfront and 25k in interest over few years. If the outstanding is 250k and if its foreclosed and they sell for 300k , what happens to my original 50k upfront that I paid? Do they keep the house as well as my home equity?
My question is simple. If I take a 300k loan on a 400k hpuse. Assume I have paid 50k upfront and 25k in interest over few years. If the outstanding is 250k and if its foreclosed and they sell for 300k , what happens to my original 50k upfront that I paid? Do they keep the house as well as my home equity?
The homeowner is entitled to any excess after the first loan is paid off PLUS all of the fees and interest associated with the missed payments and foreclosure process, then any subservient liens. If there is anything left over, the lender is supposed to track down the owner and give them the excess proceeds.
So yes that is how it works in theory, but only a crazy person would allow it to happen that way. The fees associated with foreclosure are large so it makes no sense to not sell it, avoid the foreclosure on a credit report, and make more money from the excess.
My question is simple. If I take a 300k loan on a 400k hpuse. Assume I have paid 50k upfront and 25k in interest over few years. If the outstanding is 250k and if its foreclosed and they sell for 300k , what happens to my original 50k upfront that I paid? Do they keep the house as well as my home equity?
That depends upon the state. In Michigan, if your house is taken through foreclosure, you lose all equity that you may have had in the house.
My question is simple. If I take a 300k loan on a 400k house. Assume I have paid 50k upfront and 25k in interest over few years. If the outstanding is 250k and if its foreclosed and they sell for 300k , what happens to my original 50k upfront that I paid? Do they keep the house as well as my home equity?
Generally, you would be entitled to the $50K, minus any court fees and other costs associated with the mortgage company foreclosing on your home. (And minus any other claims that anyone might have against the property -- second mortgage, HELOC, unpaid taxes, unpaid homeowner's association fees, any judgments that have been filed as a lien against the property, etc.)
If your house is actually worth $300K, you would be better off selling it on your own.
(I'm not clear on your figures, though. If you bought the house for $400K, and took out a $300K loan, you would have put down $100K and at that moment had $100K in equity. If the outstanding loan amount is $250K, you'd have $150K in equity. If the house decreased in value to $300K, then you only have $50K in equity.)
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Beware: Based on what was happening in the recession, you may find that some that some "flipper" will see the pre-foreclosure posted and will come along and offer you $20k over what's owed to "give you something to help with moving costs before the banks sells it at a loss."
Generally, you would be entitled to the $50K, minus any court fees and other costs associated with the mortgage company foreclosing on your home. (And minus any other claims that anyone might have against the property -- second mortgage, HELOC, unpaid taxes, unpaid homeowner's association fees, any judgments that have been filed as a lien against the property, etc.)
If your house is actually worth $300K, you would be better off selling it on your own.
Again, that depends upon state law. Some states apparently require a return of extra equity, and some do not. Due to the fact that Michigan does not require a lender to compensate a foreclosed homeowner for recovered value in excess of the mortgage liability, we've had a problem with predatory lenders. A predatory lender purposely loans money--usually in a refinancing situation or on a house owned free-and-clear--with the hope that the homeowner actually loses the property through foreclosure, thereby recovering not just the loan amount, but any equity that the homeowner may have had.
Equity Stripping
Look out if a lender bases the decision to give you a mortgage on the equity that you have in your home instead of on your income. A predatory lender may loan more than you can pay every month and wait for you to default on your loan. The predatory lender can then foreclose on your house and strip you of your equity!
Again, that depends upon state law. Some states apparently require a return of extra equity, and some do not. Due to the fact that Michigan does not require a lender to compensate a foreclosed homeowner for recovered value in excess of the mortgage liability, we've had a problem with predatory lenders. A predatory lender purposely loans money--usually in a refinancing situation or on a house owned free-and-clear--with the hope that the homeowner actually loses the property through foreclosure, thereby recovering not just the loan amount, but any equity that the homeowner may have had.
Wow....
That is pretty chilling.
I have heard of hard money lenders taking flip properties after giving impossible funding, but..... Jeeze...
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