Nearly one-fifth of the entire American homeowner population is currently underwater on their mortgage payments (Bloomberg.com). These unlucky homeowners owe more on their homes than the current appraisal value. Having an underwater property can be a hardship for consumers who want to refinance their mortgages or need to relocate to less expensive living condition.
Underwater homeowner's may be stuck in this uncomfortable position until the market turns or they find a way out. Fortunately there are some options including:
- Bankruptcy: Is a variety of court proceedings that allows a debtor who own more money than their assets can cover to transfer said assets to a trustee. The legal transaction should not be taken lightly as your credit score will be severely damaged and can take up to a decade to repair. However, if you are on the verge of losing your home or are balancing multiple debts, this can be the best fix for the situation.
- Call Your Lender: Financial institutions are well aware of the current economic climate, and do not want to end up owning anymore foreclosed properties than necessary. Contacting your lender and asking if they are willing to renegotiate any part of the mortgage loan principal balance owed may be all the help you need.
- Short Sales: Short sales involve selling real estate at a price lower than what is owed on a property. If a homeowner is struggling to make their home payments their bank may be willing to approve the transaction as a way to mitigate their losses on a mortgage default.
- Find a Tenant: Homeowners can opt to temporarily move out of their homes, find a less expensive rental and then rent their properties at a high enough rate to cover the mortgage payments. When they have gained their financial footing they can move back in and continue paying off their debt.
- Ride out the Storm: What goes down will eventually go up. If those with underwater mortgages have the means to deal with the situation, they should. It may take years, but eventually the real estate market will heal and property values will be restored.
- Walk Away: Before trying this move, it is important to check with a lawyer. Some states have laws where property owners can walk away from their fiduciary responsibility and turn over the house keys to appropriate lender. The process requires contacting your bank and presenting them with the deed-in-lieu. If they accept the move you can stop making house payments and live there until the bank tells you otherwise. Banks actually may approve this move as it could save them the time and money associated with the foreclosure process.
If you are financially struggling homeowner looking to take advantage of the lowest mortgage rates in history, Mortgage Marvel is here to help.
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