Since there are many people unemployed nowadays, a lot of homeowners cannot keep paying their monthly mortgage payments. Some people have low rates but still, without income, they still cannot pay them. Some homeowners are worse off and have adjustable rate mortgages and find their home payments adjust to twice what they were paying. Many homeowners cannot afford to stay in their homes so they should sell and move on. However, with real estate prices dropping sharply, 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?

Should The Sell Their Homes?

The first option that comes to mind for a lot of homeowners is to sell and move on. The problem is that, if they were to sell their homes, they are going to get less for them than what they owe the banks. Therefore, selling may not be the right option. However, it is often a good idea to consult a Realtor to make absolutely certain 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.

Is Refinancing an Option?

Often when you owe more than your home is worth, lenders are not likely to lend. However, there may be options that allow you to refinance your home or modify your loan especially when the rates are very low right now. If your credit is good and want to explore the option of refinancing or have any home loan questions, call your bank as well as other lenders for comparison. Sometimes, your own bank cannot help you but other banks may be able to.

The Result of Foreclosure

Many homeowners cannot sell their homes, cannot refinance and cannot modify their loans. Then their mortgage companies try to foreclose on them. 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 new 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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Filed under: Real Estate

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