Most homeowners that end up loosing their home to foreclosure think that it is the end for them. Even though a Miami foreclosure or short sale will stay on your credit report for some years, it doesnâ€™t mean that it is the end. Owners should be thankful for their family and health after the foreclosure because the process can be tremendously emotional for many. So for future homeowners, learning just what the consequences of foreclosure and short sales are is important in avoiding financial troubles in the future.
Effects of Short SaleÂ
Short sale is an alternative forÂ Miami foreclosureÂ owners. This allows them to sell their house even if it is already valued less than what they owe to the lenders. After a short sale, the lender will write off your debt but your credit score will suffer â€“ dropping between eighty to 100 points. And because of this, it will take about one and a half year before youâ€™ll be able to apply for a mortgage with a good interest rate.Â
Homes that were purchased in the past two years or those bought through capital gains with deferred tax in the course of 1031 exchange are subject to capital gains tax implications if sold under a short sale. If this happens to you, it is important to consult with a professional before finding yourself at the wrong side of the law.Â
Effects of ForeclosuresÂ
If your property has been foreclosed, you will experience a big drop in your credit score in the tune of 250 or more points. This is also true for Miami foreclosure homes that are given back to the lenders via a deed in lieu. It will take you approximately three years of consistent on-time payments to remove the blemish from your credit report and regain what was lost in your score. Until then, expect to receive less favorable mortgage terms when applying for a loan.Â
Fortunately, you will not be charged with any taxes for your Miami foreclosure. In the past, debt from mortgages cleared through a foreclosure can be taxable. But due to the Mortgage Forgiveness Debt Relief Act of 2007, foreclosure owners will not be taxed by their lenders. But like short sale, it is crucial to learn if you are at risk of capital gains tax implications.Â