Since there are so many people unemployed in this economy, a lot of homeowners are finding it hard to keep up with their mortgage payments. Some people have good rates but still, without jobs, they still cannot keep paying. Some homeowners have adjustable rate mortgages and find their home payments adjust to something they cannot afford. Many homeowners cannot afford to stay in their homes so they have to sell and move on. The problem is that, with falling real estate prices, they also find themselves having upside down mortgages. That means, they owe the mortgage companies more than their homes are worth. So, what can they do?
Is Selling an Option?
The first thing to do that comes to mind for a lot of homeowners is to sell and move on. But, if they were to sell their homes, they will get less for them than what they owe the lenders. Therefore, selling may not be the right choice. However, it is often a good idea to talk to 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.
Choosing to Refinance
Usually when you owe more than your home is worth, banks will not lend. But, there might be options that allow you to refinance your house or modify your loan especially when the rates are historically low right now. If your credit is good or fair and want to explore the option of refinancing or have any home loan questions, call your mortgage company as well as other financial institutions for comparison. Sometimes, your own lender might not 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. Soon their mortgage companies start to foreclose. 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 work on your side. 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.
