With so many people unemployed in this bad economic time, a lot of homeowners find themselves unable to keep paying their house payments. Some people have good rates but, without employment, they still cannot keep up. Some homeowners have adjustable rate mortgages and find their home payments adjust to twice what they were paying. Many homeowners cannot afford to stay in their current homes so they need sell and move on. The problem is that, with falling home prices, they also find themselves having upside down mortgages. That means, they owe the banks more than their homes are worth. So, what are their options?
Is Selling an Option?
The first thing to do that comes to mind for lots of homeowners is to sell and move on. The problem is that, if they were to sell their homes, they are likely to get less for them than what they owe the banks. Therefore, selling may not be the most logical choice. But, it is a good idea to talk to a real estate professional to make sure that there is no 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 do not want to lend. However, there could be options that allow you to refinance your house or modify your loan especially when the rates are very low right now. If you have good credit and want to explore the option of refinancing or have any home loan questions, call your bank as well as other mortgage companies for comparison. Sometimes, your own bank 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 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.
