What happens when you owe more than your home is worth?
So many people are in upside down mortgages right now where they actually owe more to the bank then the home is worth. If you are in this situation you are not alone and before you stop making payments altogether here are some options you may want to consider.
- Loan Modification or a Loan Rework
Since banks are not in the business of selling home, more than likely they are willing to work out a loan modification. They would prefer you stay in your home and pay the mortgage so they are usually willing to work with you to accomplish that.
The following are different options to consider.
1. Loan Reduction. This is simply a process by which the lender reduces the amount you owe on your home. If you can show proof that homes like yours in your area have recently sold to buyers for less than what you owe on your home, the lender may agree to lower your loan amount. Lower loan amount equals lower the monthly payments. To get started, call your lender and ask for the loss mitigation department.
2. Extension. This loan modification (also handled by your lender's loss mitigation department) extends the term of your loan. Your payments are lowered and spread out over a longer period of time.
3. Interest Rate Reduction. This option is especially favorable if you have an adjustable rate mortgage that has risen so high that your payment is no longer affordable. Often, the bank would rather reduce the interest rate than foreclose.
And remember to always stay in close communication with your lender. This proves you are serious about wanting to keep your home with your credit falling apart.
If you are starting to get behind in your mortgage but know you may have a large sum of money coming that could potentially catch you up such as a bonus, inheritance etc.. then you might be eligable for a forbearance. But you must bring the payments up to date by a specified date and start making your payments at that time. Resuming the payments is called reinstatement. (Learn more about selling secrets from my Great Falls real estate affiliate.)
This plan states you will keep paying usually a lower amount and some of that would go towards the home not just the interest.
If there is just no hope of selling and you can't pay your mortgage, think about renting it or leasing to own. Many lease to own options include a down payment for you so that could bring your payments current and keep you on track.
If your finances are completly in chaos, you may not be able to pay for your home at all. A short sale may be the best way to avoid foreclosure. In a short sale, the house is put on the market at a price that is less than you owe. Sometimes the bank will accept the reduced amount. Other times, they will expect you to pay part of, or all of the difference. But in the end the bank will work out a plan to help you pay them back. (My Mercer Island real estate connection has some great articles on selling options.)
Many time the banks don't care who is paying the mortgage as long as it is being paid. You might be able to assume the mortgage over to someone who is able to pay it and then either sell it to them at your mortgage cost or sell it to them in the future. But be very cautious of this. Con artist have been known to scam sellers out of there homes and then don't pay but in the end, the sellers gave up their homes but still owed the mortgage.
For more information about the Lake Chelan real estate area and help on your options before you face foreclosure contact us today. We help you with dignity and honestly in these tough times and are willing to work with you on the sale or lease of your home.
MORE HELP FOR SELLERS: For details on all homes or where to live in Tacoma, consider the experts at Better Properties North Proctor.