You never start your mortgage out as an underwater mortgage but sometimes it is what happens.
If your home was worth more when you bought it then it currently is worth at the moment. Maybe you have borrowed against your house but no matter how it happened you now owe more then you can get for your house. No matter how it happened you do have multiple options to help resolve the underwater mortgage.
After you have read this article you will know some of the pros and cons that are available with each option.
You can choose to stay within the home and keep paying.
The default choice if you choose to do nothing is to stay in the home and keep paying on whatever current loan and its condition that you have. People’s first inclination may be to keep sending in the monthly mortgage payments because as long as the payments are made, they can keep living their life in their home indefinitely.
It is the easiest choice and if you decide to do so, realize that the maintenance costs and upkeep will still add up even as the home loses value. Nevertheless, a lower value may mean lower taxes, so it may be smart to get the home reassessed.
Refinancing and Loan Modification
If you have negative equity in your home these options might not be for you, but it all is really dependent on your specific situation. If a home has negative equity it will be impossible to get any federal loans that are backed by Fannie May or Freddie Mac.
When you do this you will be more vulnerable even if you have extenuating circumstances like job loss or large, unexpected medical bills, end you may end up with losing your house if you aren’t careful.
You can also talk to your lender to modify your loan to a lower interest rate. Although this does not affect the principal balance, it will make your monthly mortgage payments lower. However, this is quite time intensive and will not affect the value of your home.
If you sell a home for less then what you owe on it, you call it a short sale. Why would a lender do something like this. up, might ask? The lender would rather do this then go through the foreclosure process and you can avoid foreclosure of your home. Lenders are in the business of lending money and not intended to manage and own properties so the lender may be willing to work with you now so you can sell the home for a larger amount down the road.
Walking Away or Proceeding to Foreclosure
In this circumstance, you have an underwater mortgage but you are also in a more dire circumstance in which you cannot afford the monthly mortgage payments either. So, you decide to simply give back the house to the lender and walk away. This is essentially the same as foreclosure proceedings, and it is a costly endeavor, both financially and emotionally.
This is a red mark on your credit score that will last several years. You will be billed for the foreclosure costs in addition to the mortgage itself and the costs of maintaining the home such as trash pickup or lawn care may be added to your bill as well.
Sell to an Investor
If you are going through a short sale or foreclosure it would be a good idea to at least think about selling your house to an investor. These professionals have helped all types of people resolve various issues. If you catch it early in the process an investor might be able to talk to the lender and get them to conduct a short sale on the home.
Investors will sometimes just buy the home in order to try to avoid the foreclosure. You can almost always find a few investors in any local area with either just doing an internet search or by going old fashion and open up the white pages.
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