Upside Down in Your Mortgage?
Option’s for when you owe more than its worth
Let’s face it, you are not alone with the rest of your “under water friends” who bought at the height of the market. Not only do you own this great home, but most have high interest rates. Staying in your home and throwing GOOD MONEY at your bad investment is not helping you grow financially, or save money.
You may be lucky enough to have an Aunt Ida fund to make up the difference, otherwise I have put together 7 options to help you with your upside down mortgage. I would seek legal advice on 2-7, since rules and laws do vary from state to state.
Option One: DEAL WITH IT
Staying in your home is the least stressful option. A great option if you enjoy taking your money and throwing it away every month at an investment you might never see a return on. However, the right thing to do if you care about your credit and accepting the fact that life isn’t always fair. Because of high interest rates, and the limitations on selling it, dealing with it and “sucking it up” leaves you at option one. But, the good news is that one day in the very distant future you will have it paid off.
Option Two: RENT IT
If you are able to rent your upside down home and cover your expenses this may be a great option. Even if you barely cover your expenses, and you can find an other cheaper living arrangement this would be a good scenario. Sometimes you may have homeowner association rules against renting out that make this option less favorable.
Other options, you can rent out a room, or even two. Probably, not the American Dream you imagined, but a good option to make your living expenses less.
Option Three: Short Sale
A Short Sale is when you can prove a financial hardship and you get the bank’s permission to sell the home for less than what it is worth. Most banks require that you have missed payments. Short sales can be a painful and long experience. They will ding your credit for at least 7 years, but you will NOT be responsible for the difference owed to the bank. However, some banks will make payment arrangements with you for the remaining amount owed, but at a low to zero interest rate. Every bank is different. Having an attorney who specializes in SHORT SALES is highly recommended.
Option Four: Modify Your Mortgage
Many homeowners are taking advantage of various loan modification programs. These programs offer lower interest rates, but also restart the term of your loan for 30+ years. The home will have to qualify and in some cases appraise. The upside in doing this is by making the home more affordable you could potentially put yourself in a position where you can sell it sooner.
If this option doesn’t work, see option five.
Option Five: HARP Program
HARP PROGRAM is a great program for those who are upside down in their mortgage, have made on-time payments, have a reasonable good credit score, and falls into the guidelines in this video.
HARP if you meet all of the following criteria:
Option Six: Walk
By no means am I suggesting foreclosing on your home. But, lets face it, people are doing it. In some areas, mortgages are often made on a non-recourse basis — so, the bank can take your house, but can’t come after you for any balance due on your mortgage. (Check with an attorney! This is not true everywhere and in every case)
A better option is to contact your bank regarding a deed-in-lieu, where the bank agrees to take the deed. All you are doing is saving the bank a step from taking you to court to sue you for the keys. However, they can still come after you for the difference owed.
To get started:
Offer the bank a deed-in-lieu.
Stop making payments.
Continue to live in the house and save money, cause let’s face it your credit is about to take a 7 year hit!
Most of the time the bank would want you to try to short sell your home with a Realtor. This shows good faith, however you need to prove financial hardship with a short sale and missed payments.
Option Seven: Bankruptcy
Bankruptcy is forgiveness of all debt. This is the sure way to make sure you are DONE with the collectors calling, and the bank coming after you. When you file bankruptcy you can forgive other debt like credit cards, car loans, and your mortgage loan. There is something calling AFFIRMING your loan in the bankruptcy process. This would be if you want to not put your home in your bankruptcy and still “agree” to pay your mortgage cause you still want to live there. Many bankruptcy attorneys may advise not reaffirming your mortgage loan, even if you want to stay in your home. When you file bankruptcy, even if you decide to keep the home and make payments, the bank no longer reports to the credit bureaus that you are making ON TIME payments, because the loan wasn’t “reaffirmed” in your bankruptcy.
Hope this information was helpful! If you have specific questions on selling your home in Charlotte, or you are upside down on your mortgage please contact me directly I am happy to help.
Danielle Wasser
www.daniellewasser.com
(704)604-2999
drivendanielle@gmail.com
