You may have heard the term, “Deed in Lieu of Foreclosure.” Essentially, a “deed in lieu of foreclosure” is when a borrower gives all of the property to a lender in an effort to avoid a foreclosure on a defaulted loan.
Both instances are stressful. Both instances can be taxing on you emotionally however a deed in lieu of foreclosure may lessen the blow just a little.
Here are the pros:
1. Borrowers may be immediately released from the mortgage debt by the lending institution.
2. Your credit score will be impacted less. Still horrible but less horrible.
3. The waiting period before you may obtain another mortgage is more favorable.
4. One day you are there and the next day you are gone. The stress of being served notices for the world to see may not be what you want to go through.
Many lenders prefer this option, because it allows them to reduce the financial burden and time associated with repossessing a home and usually prevents the borrower retaliation that is common with foreclosure proceedings. However, if there are any liens associated with the home, the lender will much prefer to foreclose upon the home as it would make the title clearing process much easier.
The entire transaction is voluntary and completed upon agreement between the homeowner and the lender.