5 Things You Can Do When Your Mortgage is Upside Down

Questions Covered in This Article

Everyone seems to be talking about how the housing market is booming at the moment.

 

People are either eager to sell their homes or can’t wait to buy one of their own. This may be an interesting time in the real estate market, especially for anyone selling their home in Harrisburg, PA but there are plenty of people that are too busy struggling with their mortgage to even think about buying or selling. 

 

Are you dealing with an upside-down mortgage? Figuring out how to sell your house when you have mortgage troubles can seem impossible.

 

Fortunately, you still have plenty of options available. Let’s dig into the meaning of an upside-down mortgage and what you can do if you want help dealing with it. 

What Is an Upside Down Mortgage? 

 

An upside-down mortgage (also known as an underwater mortgage) occurs when a person has a home loan with a higher principal balance than what it’s truly worth. This problem can be troublesome, but it isn’t exactly uncommon

 

Want to know if you have an upside-down mortgage? Figuring that out is simple! All you need to do is figure out how much your home is worth then subtract how much you owe from that value. 

 

As an example, let’s say you brought your home 3 years ago at $390,000. After doing some research you realized that your home is actually worth $310,000. This hit is bad enough, but then you realize you still owe $360,000 on your mortgage. 

 

Upside-down mortgages happen typically happen for one of two reasons. You may have an upside-down mortgage because home values in your area dropped. This can happen for a variety of reasons from market forces to changing demographics. 

 

The other common reason is missed payments. Once you fall behind on mortgage payments it can be incredibly difficult to get ahead again. Interest and other rates that accrue can make it getting up-to-date on payments seem nearly impossible. 

 

Do you have an upside-down mortgage? If you find yourself owing more than your home is worth, you have 5 options you can choose from.

a home with a text box explaining reasons for upside down mortgage

5 Things You Can Do If You Have An Upside Down Mortgage

 

1. Stay and Try to Pay Off the Home

 

This is by far the least complicated option, but it may not be the best for everyone. Instead of trying to sell or find a different way, you simply buckle down and try to pay what you owe. 

 

If you’re truly feeling stuck but feel like repayment is your best option, it’s always worth talking to your lender about payment options. If you’re struggling to make monthly payments they may be able to figure out a payment amount you can manage. 

2. See If You Qualify for HARP’s Successor Programs 

 

You’re far from the only person that finds themselves with an upside-down mortgage. There are a lot of homeowners that are struggling to pay mortgages on their homes, and the government developed a program to help people in your situation. 

 

HARP®, known as the Home Affordable Refinance Program® was made in 2009 to help homeowners that were having trouble refinancing their mortgages. This program officially ended in 2018, but there are two programs that succeeded it: Fannie Mae’s High LTV Refinance Option and Freddie Mac’s Enhanced Relief Refinance Mortgage. 

 

Those programs are only available to people with a mortgage through Fannie Mae or Freddie Mac. There are also stipulations around late payments and delinquency that may disqualify people. 

3. Sell Your House and Use the Money Toward a Payment

 

Sometimes the best way to deal with your mortgage is to pay it down as much as possible. If you have the option to move to a different home, you could be better off selling your home and putting that money toward your mortgage.

 

The funds from a traditional home sale can go toward what you owe. In an ideal world, it would also go toward any home equity loans or HELOCs you have along with closing costs. If you’re trying to pay off your mortgage, anything that gets you close can be ideal. 

 

All you have to do is go through the traditional home selling process and you could be lucky enough to find a buyer. In some cases, you could find someone that’s willing to pay cash. You may not be able to make a profit, but you can at least deal with the problem of your mortgage. 

4. Consider a Short Sale 

 

Maybe you’re thinking about selling, but you don’t think you’ll be able to get anything close to your mortgage. If you find yourself in that situation, you may want to consider a short sale. 

 

A short sale happens when homeowners are forced to sell their property for less than what they owe. In cases like this, all of the proceeds to the sale go towards the lender. It’s also up to the lender to approve the short sale. 

 

This doesn’t completely solve everything for the owner. The lender could choose to forgive the remaining balance that’s owed, or they could try to get more money from a deficiency judgement. This can require the seller to pay the lender a part of the owed balance or to pay it off entirely.

 

Short sales can be a way out of a completely unmanageable mortgage, but it’s far from the best option for sellers. Carefully weigh your options before you decide to go down the short sale route. 

5. Foreclosure or Declare Bankruptcy 

 

Foreclosure and bankruptcy are two financial and legal options you could consider when you’re having mortgage trouble. When you go through foreclosure the bank officially seizes your property. Declaring bankruptcy means that you’re no longer able to pay back your debts.

 

Both options can drastically and negatively affect your credit. Going through foreclosure could mean that you’re unable to obtain a home loan for 7 years. If you go through bankruptcy, those remarks could stay on your credit report for 10 years. 

 

These are by far the most extreme options for people who are having trouble managing their mortgages. Foreclosure and bankruptcy can have negative effects on your credit, but they could also be the only way to get you out of an unaffordable mortgage.

Upside-Down On Your Mortgage? Request a Cash Offer!

Dealing with the aftermath of an upside-down mortgage can be stressful, but it’s important to keep in mind that you have options. 

 

We’ve helped plenty of homeowners in financial distress in central PA, and we’re ready to help you. Selling your home for cash can be the best option possible when you’re facing mortgage troubles.

 

Make sure to contact us today so you can learn more about our services and speak with a member of our team.