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 FAQS
  1. What is the difference between "closed end credit" and a "line of credit?"

    Depending on the need, an individual or business may take out a form of credit that is either open- or closed-ended. While ... Read Full Answer >>
  2. In what instances does a business use closed end credit?

    The most common types of closed-end credit used by both businesses and individuals are mortgages and auto loans. Businesses ... Read Full Answer >>
  3. What are the long-term effects of delinquent accounts?

    Delinquency occurs when borrowers fail to make payments on their loans. All loan borrowers should do their best to avoid ... Read Full Answer >>
  4. How was the American Dream impacted by the housing market collapse in 2008?

    The American Dream was seriously damaged by the housing market collapse in 2008. In many ways, the American Dream is a self-fulfilling ... Read Full Answer >>
  5. How much risk is associated with subprime mortgages?

    A large amount of risk is associated with subprime mortgages. Since the mortgages are specifically for people who do not ... Read Full Answer >>
  6. What are the financial consequences of filing for bankruptcy?

    The financial consequences of filing for bankruptcy are substantial and can be long-lasting. They include impacts on your ... Read Full Answer >>
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. Home & Auto

    Are Home Inspections Worth It? - Price vs. Value

    If you’re wondering whether home inspection is worth the investment, the following information will help you decide.
  10. Credit & Loans

    Don't Get Trapped in a Zombie Foreclosure

    Understand how foreclosures work and you can avoid the disastrous consequences of having a zombie foreclosure.

You May Also Like

Hot Definitions
  1. Topless Meeting

    A meeting in which participants are not allowed to use laptops. A topless meeting organizer can also ban the use of smartphones, ...
  2. Hedging Transaction

    A type of transaction that limits investment risk with the use of derivatives, such as options and futures contracts. Hedging ...
  3. Bogey

    A buzzword that refers to a benchmark used to evaluate a fund's performance. The benchmark is an index that reflects the ...
  4. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  5. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  6. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!