Still Underwater? You Have Options

Still Underwater? You Have Options

The real estate market may be recovering across most of the U.S. but millions of Americans continue to struggle with underwater mortgages. According to MarketWatch, first quarter 2015 saw a decline in the number of negative equity properties to 15.4 percent from first quarter 2014’s 18.8 percent. However, more than 4 million homeowners still owe their lenders at least 20 percent more than their properties are worth. Fortunately, if you’re among them—whether underwater a few percent to 20 percent or more—you still have a number of options.

Refinance or Modify your Mortgage

If you’ve been struggling to make mortgage payments, you’re not alone. One recent survey found 52 percent of Americans have made at least one major sacrifice to pay their mortgage in the last three years. Fortunately, refinancing can help you reduce your monthly payment. While most banks won’t refinance underwater homes without a significant influx of cash, the government’s Home Affordable Refinance Program will. You can learn more about HARP and HAMP (the Home Affordable Modification Program) at

Rent Out Your Home

Perhaps you have a family member willing to let you move in for a while. Maybe you’ve found an adequately sized apartment for a fraction of your mortgage cost. Moving out and renting your home to someone else for as much—or more—than your monthly mortgage payment could help you keep your home until you’re able to refinance (and move back in) or break even with a sale.

Short Sale Your Property

If you are already facing a foreclosure, a short sale could be an option. It involves selling your home for less than the amount owed on your underwater mortgage, with the lender absorbing the loss. A short sale can have negative effects on your credit score, so it makes sense to try to refinance or modify your mortgage to get payments under control before going this route.

Ask for a Deed-in-Lieu of Foreclosure

If you’ve adjusted to the idea of losing your home, but want to avoid the foreclosure process, you may be able to request a deed-in-lieu of foreclosure arrangement from your lender. This agreement allows you to transfer your property’s title to your lender, though you will still experience negative credit score effects. A deed-in-lieu may be preferable to a short sale if you’re concerned that your lender will try for a deficiency judgement (in which you’re liable for the difference between sale price and mortgage balance) if you pursue the latter.

While dealing with an underwater mortgage can be stressful, timely action can help you prevent foreclosure and get your payments under control. Whether you’re interested in pursuing a refinance or modification, renting out your home or selling the property, we’re here to help. Contact us for answers to all of your real estate questions.


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