What is a deed-in-lieu of foreclosure?

A deed-in-lieu of foreclosure may be an option if you are trying to move out of your home and avoid foreclosure. This may help you avoid being responsible for any amount left on the mortgage and avoid foreclosure, both of which can affect your ability to purchase another home in the future. If you are considering a deed-in-lieu of foreclosure, make sure that it covers the entire amount of money you still owe on the mortgage loan.

If you are unable to pay your mortgage, you need to take action before the bank begins foreclosure proceedings. The worst thing you can do is nothing. Learn how you can avoid foreclosure, or see our handout for more information. You may also have options that allow you to stay in your home, so you should contact your lender first and see what options they can offer you.

If you’re considering a deed-in-lieu of foreclosure, also ask your lender or servicer about help with your relocation expenses through private programs that are sometimes called “cash-for-keys.”

If you live in a state where you are responsible for any deficiency, which is a difference between the value of your property and the amount you still owe on your mortgage loan, you can ask your lender to waive the deficiency. If the lender agrees, ask for the waiver in writing and keep it for your records. You may still incur a tax liability, so you may want to speak with a tax professional or attorney.

To learn more about your options, or to plan your next steps if you choose the deed-in-lieu of foreclosure option, use our Find a Housing Counselor tool to find a U.S. Department of Housing and Urban Development (HUD)-approved housing counseling agency.

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