Many people felt the pain of losing their homes after the 2008 economic crisis. It is still a common occurrence in some areas, but the good news is that the statistics are less alarming as home values increase compared to the recession. This is not comforting if your mortgage payments are higher than the value of your home.
What should you do if your mortgage debt is greater than the value of your home?
These are the top options for homeowners who find themselves in this situation.
- Stay at home
- Modify or refinance the loan
- Rent or sell the house
Stay at Home
It is understandable why homeowners continue to pay their mortgages, even though it could take years for the property to be worth more than the amount you owe. Homeowners go into foreclosure or miss payments. Many people feel guilty about debt because they know You must pay it back. It is often the best choice to protect your credit rating and living situation.
If you are behind on your mortgage payments, the U.S. Department of Housing and Urban Development might have a program that can help. The eligibility requirements for these programs may vary, but HUD housing counseling agencies can help you navigate the right path regardless of your current situation. You can start your search here.
To determine if staying in your home is the best choice, it is good to compare the monthly mortgage payment with the repair and tax costs.
Refinance the loan or modify it
Homeowners with a mortgage that exceeds the property’s value may be eligible for HARP (Home Affordable Renewal Program) refinance options. For borrowers with high loan-to-value ratios, HARP offers a simplified refinance option. This option is only available to homeowners who meet certain criteria, including current mortgage payments for the past 6 months and a source income.
Homeowners can modify loans to lower their interest rates or pay less. Lenders might also extend the loan term or let homeowners spread the missed payments across the entire loan. It is often difficult to get loan modifications through banks.
You can either rent or sell your home
Many people wish to avoid foreclosure. A foreclosure can cause a drop in credit scores of 85 to 105 points. A foreclosure can cause credit damage that lasts up to seven years. This will make it hard to purchase a home or finance any other transactions. It can be difficult to feel like you don’t have any other options upside down on your mortgage. Before foreclosing on your home, there are many options. It should not be an option.
The rent-to-own option is popular among homeowners who are behind on their homes. They have the income to pay the mortgage, and they can use it to buy time. Rent to own allows homeowners who cannot sell their homes to rent them to people who can’t qualify for mortgages. The homeowner must become a landlord to rent their home. They also have to rely on another person for the monthly payments.
Enjoy a Short Sale
A house with a high loan-to-value ratio can be difficult for a seller. The homeowner can’t accept an offer for less than the mortgage amount because they have to pay it. Homeowners can sell their homes for less than the value and then sign a new agreement. You would negotiate with the bank to agree on what they will accept. Banks lose money if you default with your loan. Many banks will allow short sales to avoid losses. Although a short sale can harm your credit score, it is usually not as damaging as a foreclosure. Short sales are common when homeowners need to sell a house fast. Super Cash For Houses is available if you are in an urgent need to sell your house quickly and get on with your lives. We offer a free consultation to help you sell your house quickly and fairly.