With many people unemployed right now, a lot of homeowners are unable to keep paying their monthly mortgage payments. Some people have good, fixed rates but, without income, they still cannot pay them. Some homeowners are worse off and have adjustable rate mortgages and find their home payments adjust to outrageously high amounts. Many homeowners cannot afford to stay in their homes so they should sell and move on. The problem is that, with real estate prices falling sharply, they also find themselves having upside down mortgages. That means, they owe the mortgage companies more than their homes are worth. So, what are their options?
Should The Sell Their Homes?
The first thing that comes to mind for lots of homeowners is to sell and move on. However, if they were to sell their homes, they are likely to get less for them than what they owe the lenders. Therefore, selling may not be the right option. However, it is a good idea to consult a Realtor to make sure that there is not a way to sell and walk away free and clear without having to come up with the rest of the money for the mortgage balance later on.
Is Refinancing an Option?
Usually when you owe more than your home is worth, mortgage companies are not going to lend. However, there may be options that allow you to refinance your house or modify your loan especially when the rates are extremely low right now. If you have good or fair credit and want to explore the option of refinancing or have any home loan questions, call your lender as well as other financial institutions for comparison. Sometimes, your own bank cannot help you but other banks may be able to.
Mortgage Forgiveness and Foreclosure
Many homeowners cannot sell their homes, cannot refinance and cannot modify their loans. Then their mortgage companies file the foreclosure papers. Foreclosure severely hurt your credit so it is advisable to call your bank and try to negotiate with them before they foreclose. If they do go ahead with foreclosure, however, there is the Mortgage Forgiveness Debt Relief Act of 2007 that will help you a little bit. This Act allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.
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