“I’m Underwater on My Mortgage. What Are My Options?”

Buying a house is one of the most important decisions you’ll ever make. A home gives you shelter and a place to raise a family. The quandary is that most of us cannot afford to make a lump sum payment on this investment, and so we choose the seemingly more convenient alternative – a mortgage.

But what happens when everything falls apart along the way and your loan surpasses the current value of your home? Do you abandon ship or ignore the chaos and continue paying like nothing has changed? It’s a tough spot to be in. If you are in a similar situation, here are four options available to you.

Embrace the Loss

As long as you are still living in the house and can afford it, you might as well continue with the remaining payments and make it your own. Moving to a cheaper place is not cost-effective and you might end up losing a significant amount of money in a poorer investment. While this may seem like an expensive option, you will eventually find yourself above water on your mortgage if you are consistent with the payments. The downside is that you might have to pay for a long time before you are clear, and the maintenance fees can really add up.

Rent It Out

You can also cover some of the expenses of ownership by renting out your house and moving into a cheaper apartment. Alternatively, you could still live in the house and rent out some of the rooms to help with the mortgage. Even if the income from the rent does not cover all the costs, you will be in a much better position than risking foreclosure.

Request For Loan Modification

Loan modification involves renegotiating the mortgage with your lender in order to adjust the terms of your agreement. If your lender agrees, you will have a lowered monthly payment, interest rate, and balance due. However, if any of the principle is reduced, you may incur taxes on that amount.

Short Sale

Another option is to ask the lender for permission to short sale. This involves selling the house for less than what you owe on your mortgage. Depending on your location, you might actually land some great deals. In some cases, the lender may even settle for the sale price and clear the debt.

Unfortunately, there are other lenders who may not be too reasonable and you could still have to pay some or all of the difference. The bright side is you don’t have a big debt on your back, but you now need to find somewhere to stay.

A real estate lawyer with experience in mortgage loans is what you need if you are stuck with a house that has depreciated in value. If you are underwater on your mortgage, the Law Office of Ray Garcia, P.A. can help you decide what your best option is. Contact us now to get started.