Drowning is a scary, scary thing. When your mortgage is underwater (which means you owe more than your property is worth), you need to stop and consider your options carefully. Finding underwater mortgage help is a difficult process and there aren’t any certain, easy answers. Some might say you should continue paying, hoping the market improves. Others will recommend an attempt at refinancing, though that’s not a viable option for every homeowner. Still others will suggest cutting your losses and walking away from the property. Before you act rashly, let’s look at the options available and consider which is the best fit.
Underwater Mortgage Help Options
- Stay Regardless
If you really love your home and have strong connections to it, leaving might not even be a consideration for you. If you want to stay and continue to send in mortgage checks, take a moment to consider whether you’re making an impulse decision or if it makes sense financially in the long run. Instead of sinking further underwater, analyze your financial situation thoroughly and decide if it’s truly sensible to stay. If you do stay, there may be extra maintenance costs to take care of (roofing, heating, etc.). However, if your house has fallen into a state of disrepair, you might be able to get it reassessed to lower its value (which will lower your property taxes).
- Get Outta There
Walking away from your home is essentially foreclosure. But if you’re desperate and our other underwater mortgage help options don’t seem to fit your situation, walking away might be your only option. This is a serious step, however, and should not be taken lightly. Foreclosure will heavily hurt your credit score in the same way bankruptcy does. You will likely struggle getting the bank to take back your house and may be billed extra costs (like trash pickup and insurance costs) if the house is not maintained properly leading up to the foreclosure.
- Try to Refinance
Refinancing may not be possible and your options will certainly be limited, but it’s worth a try. If you have negative equity, it may not be an option but you can always try to work with your lender and explain that you need underwater mortgage help. If your loans are through Fannie Mae or Freddie Mac, you may qualify for a refinance under the Home Affordable Refinance Program (which extends through the end of 2013). Refinancing shouldn’t affect your credit score, but if (for whatever reason) you aren’t able to afford your payments afterward, you could still lose your home.
- Modify the Loan
Modifying loans is a tricky business. Not only can it be time intensive, but it could also affect your credit score and very few loan modifications really reduce the principal (which means you’re still in negative equity). Plus, some loan modifications are only temporary. If you want to go this route, it’s recommended that you consult a credit agency approved by the Department of Housing and Urban Development to help you consider your options.
- Short Sale
With a short sale, you can sell your house for less than you owe on your mortgage. You could get a great deal, but it’s very dependent on where you live and your financial situation. Your lender must be willing to agree to the short sale and you need to be sure that the agreement truly relieves you of debt. Before you close, consult a tax professional or real estate lawyer who can discuss whether or not you owe any taxes on the forgiven debt and whether the agreement really does relieve you of your underwater mortgage.