Finding Help if You Owe More Than Your Home is Worth
By:Catherine Brock | May 26, 2009
from Mortgageloan.com
If you're one of the millions of American homeowners who are upside down on
his home mortgage, help is on the way.
Owing more money on your mortgage than your home is worth is called being
"upside down" or "underwater" for a reason-because it feels like you're
drowning, head first.
A March 2009 report estimated that roughly 8.3 million mortgage borrowers in
the U.S. were stuck in negative home equity positions, which means that
they're holding mortgage balances that exceed the value of the mortgaged
properties. This situation of being underwater (or upside down on the
mortgage), can trap borrowers into keeping a home or mortgage they no
longer want.
The upside down trap is set as soon as the borrower decides to move or
refinance. Someone who owes $300,000 on a home that's now worth
$250,000, for example, has to pay at least $50,000 cash to the lender to sell
or to obtain a mortgage refinance.
Negative home equity means slim options
Homeowners who find themselves in negative equity territory don't have to
automatically accept huge financial losses. Other options include:
•Staying put. From a financial standpoint, the best option may be to stay in the
home until housing values recover. It's not uncommon to purchase assets that
lose value. Car owners, for example, are often upside down on their loans
shortly after the purchase is made. People accept this scenario, because
transportation is one of life's necessities. In this sense, making payments on
an upside down mortgage isn't much different from paying rent-people do it
when they need to, and they get by just fine.
•Selling short. Homeowners could try negotiating a short sale with their lender.
In a short sale, the home is sold at market value, and the lender writes off the
remaining unpaid loan balance. This solution resolves the situation more
quickly than waiting for a recovery, but it will hurt the homeowner's credit score.
•Voluntary foreclosure. Homeowners could choose to surrender the deed to
the home and move out voluntarily. The advantage here is that the
homeowner decides when to cut the emotional ties to the home. The
disadvantage is that the homeowner's credit score will be damaged.
•Renting the home. In cases where the homeowner is forced to move, such as
with a job transfer, renting out the home might be the best option. Even if the
rental income doesn't cover all of the expenses associated with owning the
property, the credit impact will be less damaging than a foreclosure or short
sale.
•Refinancing with Home Affordable. Homeowners who are only slightly
underwater may be eligible for a 105 percent mortgage refinance through the
government's Making Home Affordable mortgage refinance program. See
MakingHomeAffordable.gov for more information. (The Home Affordable
program limits were recently increased to 125% of the homes value)
You don't have to let your mortgage balance pull you under the water line. The
options aren't ideal, but you can find a way to tread water through this home
equity housing crisis.
A word of caution from Dale: Although an option I would urge anyone to
contact a professional before choosing a "voluntary foreclosure." Much like a
"voluntary repossession" with a car loan it might sound better with the word
"Voluntary" in front of it (like you really had a choice) but it is equally
devastating to your credit and will likely (just like a car) lead to continued
collection activity for the "deficiency balance" which is the balance left-over
plus expenses after the property is sold. These laws vary state by state so be
careful!
Also, if you have an additional property like a summer camp or rental property
with substantial equity there are other creative options available to get your
equity in line. Invest the time to sit down with a Pro and hear your options!!
We are experts at Home Affordable loan programs and are here to
help. Call Dale today at (877) 440-2739 or email your inquiry for
an even faster response.
By:Catherine Brock | May 26, 2009
from Mortgageloan.com
If you're one of the millions of American homeowners who are upside down on
his home mortgage, help is on the way.
Owing more money on your mortgage than your home is worth is called being
"upside down" or "underwater" for a reason-because it feels like you're
drowning, head first.
A March 2009 report estimated that roughly 8.3 million mortgage borrowers in
the U.S. were stuck in negative home equity positions, which means that
they're holding mortgage balances that exceed the value of the mortgaged
properties. This situation of being underwater (or upside down on the
mortgage), can trap borrowers into keeping a home or mortgage they no
longer want.
The upside down trap is set as soon as the borrower decides to move or
refinance. Someone who owes $300,000 on a home that's now worth
$250,000, for example, has to pay at least $50,000 cash to the lender to sell
or to obtain a mortgage refinance.
Negative home equity means slim options
Homeowners who find themselves in negative equity territory don't have to
automatically accept huge financial losses. Other options include:
•Staying put. From a financial standpoint, the best option may be to stay in the
home until housing values recover. It's not uncommon to purchase assets that
lose value. Car owners, for example, are often upside down on their loans
shortly after the purchase is made. People accept this scenario, because
transportation is one of life's necessities. In this sense, making payments on
an upside down mortgage isn't much different from paying rent-people do it
when they need to, and they get by just fine.
•Selling short. Homeowners could try negotiating a short sale with their lender.
In a short sale, the home is sold at market value, and the lender writes off the
remaining unpaid loan balance. This solution resolves the situation more
quickly than waiting for a recovery, but it will hurt the homeowner's credit score.
•Voluntary foreclosure. Homeowners could choose to surrender the deed to
the home and move out voluntarily. The advantage here is that the
homeowner decides when to cut the emotional ties to the home. The
disadvantage is that the homeowner's credit score will be damaged.
•Renting the home. In cases where the homeowner is forced to move, such as
with a job transfer, renting out the home might be the best option. Even if the
rental income doesn't cover all of the expenses associated with owning the
property, the credit impact will be less damaging than a foreclosure or short
sale.
•Refinancing with Home Affordable. Homeowners who are only slightly
underwater may be eligible for a 105 percent mortgage refinance through the
government's Making Home Affordable mortgage refinance program. See
MakingHomeAffordable.gov for more information. (The Home Affordable
program limits were recently increased to 125% of the homes value)
You don't have to let your mortgage balance pull you under the water line. The
options aren't ideal, but you can find a way to tread water through this home
equity housing crisis.
A word of caution from Dale: Although an option I would urge anyone to
contact a professional before choosing a "voluntary foreclosure." Much like a
"voluntary repossession" with a car loan it might sound better with the word
"Voluntary" in front of it (like you really had a choice) but it is equally
devastating to your credit and will likely (just like a car) lead to continued
collection activity for the "deficiency balance" which is the balance left-over
plus expenses after the property is sold. These laws vary state by state so be
careful!
Also, if you have an additional property like a summer camp or rental property
with substantial equity there are other creative options available to get your
equity in line. Invest the time to sit down with a Pro and hear your options!!
We are experts at Home Affordable loan programs and are here to
help. Call Dale today at (877) 440-2739 or email your inquiry for
an even faster response.
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Sanford Branch
909B Main Street
Sanford, Maine 04073
(207) 850-1007
(877) 440-2739
909B Main Street
Sanford, Maine 04073
(207) 850-1007
(877) 440-2739
