If your mortgage is larger than the value of your home and your property is seeing negative equity, it may seem like going into foreclosure is the best solution. But oftentimes, homeowners rush into walking away before understanding all their options. Being upside down on your mortgage is overwhelming, but there are other possible solutions to your problem that don’t carry such long–term effects that should be considered before leaving your home.
Refinancing
If you’re considering foreclosure, it’s likely you won’t qualify for refinancing but it is possible. Essentially, you would be trading your mortgage in for a new one with a lower monthly payment. Homeowners must have good credit scores, meet stiff requirements and have good income / little debt to qualify for refinancing.
Mortgage Overhauls
Speak with your lender about options for mortgage modifications. Extending the length of your loan period can often result in more manageable monthly payments. Lowering the interest rate and consolidating loans can have the same effect.
Short Sales
If your bank is willing to take less than you owe on your house, you can list it as a short sale. This can be a long process that requires understanding and work from both lender and seller, but its long – term effects on your credit are far less reaching than those foreclosure causes.
Secondary Loans
Face up to your financial situation before considering secondary loans. If you’re struggling to repay your current loan, a second one is not always the best option; however, speaking with a lending professional could help you understand if a supplementary loan is a good idea for you.
With the recent struggle in the housing market, efforts have been made to help homeowners understand their options and avoid being taken advantage of when it comes to foreclosure. The Obama administration’s Making Home Affordable Program offers this advice on avoiding scams and getting help in the face of foreclosure.
- Contact a HUD – approved lending counselor. The service is unbiased and totally free.
- Be wary of any organization requesting fees for counseling or delinquent loan modification services.
- Don’t ever sign over your deed unless you’re working directly with your mortgage company.
- Don’t make payments to any organization other than your mortgage company.
- Recognize and avoid common scam approaches such as those requiring the quick turnover of papers in order to save your home and third party involvement in forgiving your debt.
MakingHomeAffordable.com is an excellent resource for homeowners considering foreclosure. If you’re upside down on your mortgage, understand your options and seek out the most reputable resources for assistance before deciding to walk away.
