Small Hope of Refinancing When Upside Down

Posted on June 27, 2009
Filed Under Unemployment Will Cause The Most Foreclosures In 2009! |

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With so many people unemployed in this bad economic time, a lot of homeowners cannot keep up with their house payments. Some of them have good, fixed rates but, without regular income, they still cannot keep paying. 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 homes so they should sell and move on. However, with home prices dropping sharply, they also find themselves having upside down mortgages. That means, they owe the mortgage companies more than their homes are worth. So, what can they do?

Is Selling the Homes an Option?

The first thing that comes to mind for many homeowners is to sell and move on. But, if they were to sell their homes, they are likely to get less for them than what they owe the lenders. So, selling may not be the right option. However, it is a good idea to consult a real estate agent 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.

Should Homeowners Refinance?

Usually when you owe more than your home is worth, mortgage companies are not likely to lend. But, there could be options that allow you to refinance your home or modify your loan especially when the rates are really low right now. If your credit is good and you wonder if refinancing is good for you or have any home loan questions, call your lender as well as other mortgage companies for comparison. Sometimes, your own lender might not have the resources to help you but other banks may be able to.

Mortgage Forgiveness and Foreclosure

Lots of 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 you need to call your bank and try to negotiate with them before they foreclose. If they do foreclose, however, there is the new Mortgage Forgiveness Debt Relief Act of 2007 that will work on your side. 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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