Voluntary Foreclosure

AAA

DEFINITION of 'Voluntary Foreclosure'

A voluntary foreclosure is a foreclosure proceeding that is initiated by the borrower, rather than the lender, in an attempt to avoid further payments. A foreclosure is the procedure that permits a lender, in the event of a loan default, to have the mortgaged property sold in order to cover some or all of the remaining debt.

INVESTOPEDIA EXPLAINS 'Voluntary Foreclosure'

A voluntary foreclosure occurs when a borrower knows that there will be no way to make future payments on a mortgage, and informs the lender of such to initiate the foreclosure process. While still harmful to credit ratings, a voluntary foreclosure can be cost effective for some borrowers who, rather than barely making payments each month (and knowing in the near future that even this will become impossible) conclude that they will be unable to continue with payments. Reasons for voluntary foreclosure include the sudden and unexpected loss of a job; or the realization that one is living beyond one's means, and the desire to become more financially stable (by living within one's means).

RELATED TERMS
  1. Foreclosure - FCL

    A situation in which a homeowner is unable to make principal ...
  2. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  3. Delinquent Mortgage

    A mortgage for which the borrower has failed to make payments ...
  4. Involuntary Foreclosure

    When a borrower defaults on a home mortgage loan and the lender ...
  5. Deficiency Judgment

    A judgment made by a court against a debtor indicating that the ...
  6. Decree Of Foreclosure And Sale

    A declaration made by a court indicating that a piece of property ...
Related Articles
  1. Home & Auto

    Foreclosure Opens Doors For Real Estate Investors

    Learn how to spot hot properties that you can turn around for a profit.
  2. Budgeting

    5 Signs That You're Living Beyond Your Means

    Learn what to watch for before you find yourself drowning in debt or filing for bankruptcy.
  3. Options & Futures

    Short Sell Your Home To Avoid Foreclosure

    Are you in danger of losing your home? Protect your credit score with a real estate short sale.
  4. Personal Finance

    Avoiding Foreclosure Scams

    If you want to save your home, avoid bogus offers and take matters into your own hands.
  5. Budgeting

    Are You Living Too Close To The Edge?

    If a missed paycheck will make your finances cave in, you must learn how to make proper supports.
  6. Home & Auto

    The Pitfalls Of Buying A Foreclosure House

    Find out if the house you're eyeing is really a good deal.
  7. Options & Futures

    Avoid Foreclosure: How To Handle An Underwater Mortgage

    Foreclosure is the biggest fear of any struggling homeowner. These tips just might save your credit rating.
  8. Home & Auto

    Your Mortgage: When It's Time to Walk Away

    Mathematically speaking, walking away can sometimes be the most prudent choice. Find out how to run the numbers.
  9. Stock Analysis

    How Chimera Investment Bear The Brunt Of REITst?

    Following the financial crisis, REITs that specialized in investing in mortgage-backed securities produced huge gains for their shareholders.
  10. Credit & Loans

    Reverse Mortgages: How To Find A Good One

    Finding a reverse mortgage generally means using a lender that specializes in them. Here's how to find a reputable one.

You May Also Like

Hot Definitions
  1. Efficiency Ratio

    Ratios that are typically used to analyze how well a company uses its assets and liabilities internally. Efficiency Ratios ...
  2. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  3. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  4. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  5. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  6. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
Trading Center