When you find yourself in a difficult financial situation, it can be easy to feel like you’re all alone. In fact, there are millions of homeowners in the same situation. But what do you do now? Taking action now can help you avoid foreclosure and keep your home.
If you’re having trouble making your mortgage payments, the first thing you should do is contact your lender. They may be able to work with you to create a new payment plan that makes it easier for you to stay current on your loan.
This blog post will outline your options and help you make the best decision for you. We will also provide resources to help you get through this difficult time.
Table of Contents
• Underwater Mortgage Meaning
• How To Walk Away From A Mortgage Without Ruining Your Credit
• What To Do If Mortgage Is Underwater
➥Talk to Your Lender
➥Consider Refinancing
➥Get Help from a Housing Counselor
➥Consider Selling Your Home
➥Deed in Lieu of Foreclosure
➥File for Bankruptcy
• Chapter 7 vs Chapter 13 On Credit Report
• Selling A House Upside Down Mortgage
Underwater Mortgage Meaning
An “underwater mortgage” is when you owe more on your home than it is worth. This can happen for a few different reasons:
- You bought your home at the top of the market and prices have since dropped.
- Your home has decreased in value due to a decrease in the overall market value of homes in your area.
- You took out a second mortgage or home equity loan and the value of your home has decreased, leaving you with a higher “loan-to-value” ratio.
If any of these things have happened to you, then you may be struggling to make your monthly mortgage payments. But don’t worry, there are options available to you.
How To Walk Away From A Mortgage Without Ruining Your Credit?
Negotiate with your lender, explain your financial situation and why you can no longer make the payments. If you have equity in your home, you may be able to sell it and pay off the loan.
You can also try to refinance your mortgage into a more affordable loan. This may be easier if you have good credit. If you’re unable to refinance, then you may need to consider a short sale.
A short sale can be difficult to do because you will need to find a buyer who is willing to pay less than the market value of your home. You will also need to get approval from your lender.
What To Do If Mortgage Is Underwater?
If you’re struggling to make your monthly mortgage payments, here are some steps that you can take to help get back on track.
1. Talk to Your Lender
The first step is to reach out to your lender and explain your financial situation. Many lenders are willing to work with borrowers who are having trouble making their payments. They may be able to offer a modification or other type of assistance.
2. Consider Refinancing
If you have equity in your home, you may be able to refinance your mortgage and get a lower interest rate. This can help lower your monthly payments and make it easier to afford your mortgage.
But if you don’t have equity in your home, you may still be able to refinance through the government’s programs. This program is designed for homeowners who are “underwater” on their mortgage.
Enhanced Relief Refinance Mortgage
The Enhanced Relief Refinance Mortgage is for homeowners who are struggling to make their payments and are deeply underwater on their mortgage.
This program is only available to borrowers who are current on their mortgage and who have a good payment history.
To qualify, you must have a Freddie Mac-owned mortgage that originated before May 31, 2009. You must also be able to show that you would benefit from refinancing.
3. Get Help from a Housing Counselor
If you’re having trouble communicating with your lender or you’re not sure what your options are, you can get help from a housing counselor. Housing counselors can provide free or low-cost assistance and can help you negotiate with your lender.
4. Consider Selling Your Home
If you’re unable to keep up with your mortgage payments, you may want to consider selling your home. This is often the best option for borrowers who are deeply underwater on their mortgage.
If you owe more on your mortgage than your home is worth, you may be able to do a short sale. This is when your lender agrees to let you sell your home for less than what you owe. You will still owe the difference to your lender, but a short sale can help you avoid foreclosure and damage to your credit.
5. Deed in Lieu of Foreclosure
Another option is to do a deed in lieu of foreclosure. This is when you voluntarily transfer the ownership of your home back to your lender. This can help you avoid the damage to your credit that comes with foreclosure.
You should only consider this option if you have no other way to keep up with your mortgage payments. Making the decision to give up your home is a difficult one, but it may be the best option for you if you’re struggling to make your mortgage payments.
6. File for Bankruptcy
Filing for bankruptcy may be an option if you’re unable to afford your mortgage payments and you don’t qualify for a modification or refinancing. This option should be considered as a last resort, as it will have a major impact on your credit.
You can file for bankruptcy on your own or with the help of an attorney. If you file for bankruptcy, you will need to complete a means test to determine if you qualify.
If you do qualify, you will then need to choose between Chapter 7 and Chapter 13 bankruptcy. Chapter 7 bankruptcy will allow you to discharge your debt and may help you keep your home. Chapter 13 bankruptcy will allow you to create a repayment plan to repay your debt over time.
Chapter 7 vs Chapter 13 On Credit Report
While both Chapter 7 and Chapter 13 bankruptcy will stay on your credit report, Chapter 13 bankruptcy may be better for your credit. This is because it shows that you’re making an effort to repay your debt.
Chapter 7 bankruptcy will stay on your credit report for ten years and will have a major impact on your credit score. Chapter 13 bankruptcy will stay on your credit report for seven years and will have a less severe impact on your credit score.
Selling A House Upside Down Mortgage
If you’re upside down on your mortgage, you may be able to sell your home and use the proceeds to pay off your debt. This option can be difficult, as you may owe more on your mortgage than your home is worth. But if you’re able to sell your home, you can use the proceeds to pay off your mortgage and avoid damage to your credit.
Colorado Cash Buyers buy houses fast for cash in any condition. No repairs and renovations are needed. We will cover the closing cost and we will make a fair offer for your home and close quickly. Contact us now for a no-obligation offer on your home.