Digging Up Other Stashes of Cash
The foreclosure process can be so emotionally devastating (as explained in Chapter 3) that you just want to crawl into a dark cave and hide from the world, but that’s not going to solve anything and is almost guaranteed to make it worse. In times of need, you need other people, particularly friends and family members who have the resources to lend you a hand.
In the following sections, we reveal the two primary sources for extra cash — friends and family members. We also provide some tips and cautions on how to borrow money without compromising your relationships.
Hitting up your relatives for gifts or loans
If you need a one-time cash infusion to set you on the straight and narrow, consider asking a relative for assistance. Tread carefully when borrowing from relatives — you want to make sure that whatever arrangement you agree to does not jeopardize your relationship:
Borrow only from relatives who are not going to need the money back right away.
Offer to pay interest, but explain that you may not be able to make payments for some time.
Don’t agree to an arrangement in which you’re going to be in no better shape several months down the road.
If you can make immediate payments, do it; if you can’t, tell them that upfront.If you come into some money, such as tax returns or work bonuses, consider paying off the loan or at least a chunk of it as a demonstration of your intention to pay them back as soon as you can.
If you demonstrate that you want to pay them off and you do pay them off, they’ll be willing to loan you money again if you need it; if you don’t, it’ll be a one-time-and-never-again loan.
Explain that you’re borrowing the money because things are tight, and you have every intention of repaying them.
Make wise decisions with the money you borrow.If you appear to be living high on the hog with borrowed money, your relative may get a little tense, and you’re certainly not doing yourself any favors, either.
Use the money wisely to resolve your current financial situation. Don’t use it in a way that causes more problems later.
Asking your friends to pitch in
Friends can be great resources for cash and other forms of support, but unlike family, friendship is a choice, so you have to be particularly careful.
Don’t ask a friends for assistance and then burn them. Treat their money better than you would treat your own, and pay it back as soon as possible.
Your repayment plan should be similar to the plan for paying back your rela- tives (see the preceding section): Pay when you can, make arrangements upfront, and be honest with your friend. Make realistic promises that you’re likely to keep.
The great thing about friendships is that friends often ask for very little in return — the friendship itself is that valuable. If you need your friend to watch your kids three nights a week, so you can work a double shift and earn some extra money, you can usually repay your friend by returning the favor or taking her out for a relatively inexpensive night out on the town. If your buddy loans you the $200 for materials you need to complete a side job, you can simply repay the $200 when you finish the job and collect your money — telling the story over a couple of cold beers about what you had to do to get the job done is an added bonus. We know a guy who built a two-story pole barn on his property, with all the labor being done by a few of his closest friends. The payment — cold beer and hot pizza.
Reciprocate when you can. You have to be ready, willing, and able to do unto others what those others have done unto you. You may not always be able to help the same person in the same way he helped you, but by making giving a habit, you begin to find that good things come your way.
Keeping a Bad Situation from Getting Worse
As soon as you begin to sense that your financial situation has taken a turn for the worse, you and the rest of your household need to work together to prevent the problem from getting any worse. The situation is as though you’re in a boat that’s taking on water. Before you start bailing out the water, you want to find the holes and plug them.
In the following sections, we show you how to stabilize your current situation so you can begin taking the necessary steps to improve it.
Freezing your finances
The number-one thing you can do to put yourself and your household on the road to financial recovery is to buckle down and stop the financial bleeding (see Chapter 8). You and everyone else who has a stake in the matter needs to identify areas where you can cut expenses. Here are some ideas to get you started:
Instead of dinner and a movie out, eat in and watch something on TV or do something else, like taking a walk or reading together.
Instead of ordering in Chinese and renting videos, cook a meal and have a family game night.
Put off that weekly trip to the salon for a manicure, pedicure, facial, and hair appointment. Do it yourself.
Scale back on this year’s vacation. Instead of flying to Aruba, head to somewhere that’s within driving distance or take day trips and pack a picnic lunch.
Instead of treating your friends and family to dinner, invite them over for a pitch-in.
If you have children, trimming the fat is more stressful, because you may fall into the trap of thinking that you’re depriving your children or letting them down. Keep in mind that the one thing your kids want and need most is you, not the stuff you buy them. You can give your kids what they need most with- out spending a lot of money — you may just have to be a little more creative.
An afternoon picnic at the county park, teaching your kid how to hit a curve ball, and taking a nature walk with your little ones are all priceless. Spend enough quality time with your kids and they may never even feel the financial pinch.
Catching up on property tax payments
Part of the process of stabilizing your current situation consists of prioritiz- ing your bills, and one of the bills you never want to overlook is the property tax bill. Even if you can’t afford to make a house payment, you should be paying your property taxes.
Why? Because every penny counts, and if you fail to pay, not only do you make it easier for someone to buy your home right out from under you, but you also make yourself vulnerable to having to pay additional interest and penalties. Your county probably charges a stiff interest on late property tax payments. If you’re like 90 percent of the population, the county is already charging you an arm and a leg for property taxes, so why pay more?
Plus, if you don’t pay your taxes, your bank or the person who purchases your mortgage at auction may pay them and add it to the payoff amount required to redeem the property. That’s not bad, except for the fact that they may have the right to charge you interest at the rate set forth in the mort- gage, which may be even more than what the county would charge you.
Finally, by not paying your property taxes, you may lose the home to a prop- erty tax foreclosure before the redemption period of the mortgage foreclosure expires. This isn’t likely to happen, because the bank or whoever purchases your home at auction is likely to pay the taxes to protect their interest, but it could happen.
Part of advocating for yourself (see Chapter 3) and part of successfully work- ing through your recovery plan is to pay attention to details and make sure that nothing falls through the cracks. Know when your property taxes are due and pay them on time, so you don’t have to cover a fat property tax bill later.
Maintaining your homeowner’s insurance
One of the most critical bills you should be paying is your homeowner’s insurance premium. After all, if the house burns down, is washed away, or is torn up by a tornado or hurricane while you’re still the owner, you want to make sure that you receive the insurance proceeds, so you can pay off the bank and keep any money that’s left.
If you fail to obtain insurance coverage, the bank steps in and obtains its own insurance policy on the house. This is called force placed insurance,which isn’t the greatest deal for several reasons:
Force placed insurance can be substantially more expensive than your average homeowner’s policy.The bank pays the premium and then adds it to the amount you owe.
The policy typically protects only the bank, not you.In the event of a loss, the bank receives the insurance proceeds, and you get nothing.
You can prevent the bank from ordering a force placed policy by paying your homeowner’s insurance premiums. Your policy should list the bank as an insured party. You may need to supply your bank with some sort of proof of insurance, either by faxing them a copy of the policy or having your agent fax a proof of insurance letter to your bank. As with everything, document the date and time you submitted the document — if your insurance company submitted it for you, have the company fax you a copy for your records. That way, if you see a fee for force placed insurance on your next mortgage state- ment, you can dispute it with evidence.
Keep thorough and accurate records of every conversation you have with someone involved in foreclosure, every document you send or receive, and every meeting you have. Double-check everything you’re told, so you know that you’re basing your decisions on accurate information. (For more about record-keeping and advocating for yourself during foreclosure, check out Chapter 8.)