What is a Short Payoff?
At the law office of Ira J. Metrick, we help homeowners stop foreclosures in a variety of ways. A relatively new method for resolving a foreclosure is a short payoff. This occurs when a lender allows the homeowner to fully pay off the mortgage for a reduced amount, for example bringing it down to Fair Market Value if the homeowner owes more than the house is worth. Not all lenders will consider this, and it has a series of requirements. We can help you understand your options for a short payoff and whether it is possible for your situation.
Short Payoffs are a new way to allow borrowers to keep their homes. Instead of the property being sold to a new owner as a “Short Sale,” the lender allows the home owners to pay them a reduced amount and keep their homes.
Short Payoffs vs Short Sales
A short payoff is not to be confused with a short sale.
- In a short sale, a homeowner sells their home to a Third Party for less than the total amount they owe their lender, and the lender agrees to accept this lower amount to satisfy the debt. In a short sale, the homeowner does not get to keep the house.
- A short payoff, on the other hand, gives you the option to keep your home. You must be able to pay the lender for the value of the property. This means being able to obtain funds, even though your credit is damaged. In most cases, the funds come from someone that is not a borrower on the current loan.
What Are the Requirement for a Short Payoff?
There are several requirements to be eligible for this:
- The homeowner must show that they are able to pay off the debt in a one-time lump sum payment. There are no payment plans.
- The homeowner will usually need to submit a complete application to be considered for a short payoff, much like a modification, short sale or deed in lieu of foreclosure.
Is a Short Payoff The Right Option for Me?
A short payoff isn’t for every situation, and not every lender is willing to consider it. Contact us today to discuss whether a short payoff is a valid option for your situation. We can help you understand the requirements for being considered, and submit a complete application.