Key takeaways
- Your home equity is the difference between the market value of your home and the outstanding balance on your mortgage. On a home worth $300,000 with a $200,000 mortgage remaining, you would have $100,000 of equity.
- If you’ve established enough home equity, you may be able to use this resource to access it for cash, and thereby prevent a foreclosure. Home equity possibilities include a home equity loan, home equity line of credit and home equity agreement.
- Other types of loans that can help homeowners avoid foreclosure include the foreclosure bailout loan and reverse mortgage. But unlike the home equity products listed above, these loans come with large fees and high-interest payments.
No one imagines when they buy a home that they might one day lose it. That’s exactly what might happen if your home falls into foreclosure.
Unforeseen economic conditions, medical emergencies or other situations can cause homeowners to fall behind on their monthly mortgage payments. When you’ve owned your home long enough to establish equity, you may be able to avoid foreclosure by tapping in to your home’s value. Accessing home equity provides cash based on the value stored in your home.
Recent foreclosure trends
During the pandemic, government programs helped protect homeowners from foreclosure, allowing them to pause payments for up to 18 months. Now, we are starting to see foreclosures climb, with default notices, auctions, and bank repossessions jumping 18% in August 2025 compared to the year before, according to property data firm ATTOM. Total foreclosures for the year are likely to be higher than in 2024, thanks to rising housing expenses, continued high interest rates and a slowing economy.
If you have fallen behind on your mortgage payments, don’t worry just yet. Avoiding foreclosure may be possible, including by accessing your home’s equity.
Using home equity to avoid foreclosure
Some people who have fallen behind on mortgage payments may look to refinance, in an effort to get a better interest rate and/or lower their payments.
However, if you’ve already had a late payment, refinancing may not be possible. Just like a credit card payment, your mortgage lender reports your timely and late mortgage payments to the three major credit reporting bureaus. A late payment can damage your credit profiles and scores, and make it more difficult to obtain refinancing.
However, there are other options if refinancing is not possible for you.
Before turning to home equity, another option you may consider if you have missed a mortgage payment is called reinstatement. This option allows you to pay the lender what you’ve missed in a lump-sum amount before a certain date. While this amount will likely include interest and fees, it’s a possibility for homeowners who haven’t fallen significantly behind, or have assets or savings they can utilize. If you’re already facing foreclosure, though, you might not be in a financial position to afford a reinstatement.
Another option is a mortgage modification. This is possible when you demonstrate to the lender that your financial issues are temporary (e.g., you are laid off but expect to be reemployed soon). A mortgage modification may also include a deferral agreement, which requires you to pay a lump sum upfront, or a balloon payment at the end.
These options are not ideal. What may be more beneficial is accessing your home’s equity.
How to access home equity
If you’ve established equity in your home, depending on your situation, you might consider the following options.
1. Reverse mortgage
The reverse mortgage option is available to homeowners at least 62 years old. Unlike a traditional mortgage or personal loan, your credit score is not a factor. Instead, the lender considers your home equity to determine the total amount to lend you.
Reverse mortgages could still be risky, however, because of high interest rates and fees.
2. Home equity line of credit
A home equity line of credit (HELOC) works like a credit card attached to your house. With a HELOC, you can access a percentage of your home’s equity and draw from a line of credit, usually up to 85% of your home’s value, depending on your financial profile.
This option could work for homeowners who have the opportunity to reinstate their mortgage by paying the past-due balance. However, a HELOC is a secured loan tied to your home, so a lender may be less likely to offer financing when the home is heading toward foreclosure. It also requires good credit, which homeowners who’ve missed mortgage payments may not have.
3. Home equity loan
Like the HELOC, a home equity loan is a secured loan tied to your property. The home equity loan works like a traditional personal loan or mortgage, and requires monthly installment and interest payments.
A home equity loan can also provide a larger amount of funds than a HELOC, and in one lump sum. If you’ve already fallen behind on your mortgage payments but the lender hasn’t yet declared foreclosure, a home equity loan might help you pay your past due balance while also obtaining enough money to make future payments until you’re back on your feet.
Again, though, a home equity loan requires good credit, especially to get a good interest rate.
4. Home equity agreement
A home equity agreement (HEA) differs from the above options in that it doesn’t require monthly debt payments.
Instead, an HEA provider offers cash up front in exchange for a portion of your home’s future value. There are no income qualifications and homeowners may be able to qualify with credit scores as low as 500. You can exit the agreement at any time during the HEA term – often 10 years – by buying out the HEA provider’s interest or selling your home.
The HEA may be a good option for homeowners who need access to sufficient capital to prevent a foreclosure.
Avoid foreclosure with a home equity agreement from Unlock
At Unlock, our home equity specialists are here for you. We have experience helping homeowners navigate difficult situations, including foreclosures. If you have established equity in your home, a home equity agreement may be able to help you avoid foreclosure.
