What Can You Do If You’re Upside Down on Your Mortgage?
With home values continuing to fall, many people are finding that they are upside down on their mortgages — meaning that they owe more on their homes than they are worth. If you are upside down on your mortgage, there are some options to deal with the problem, reports Wisebread:
- Rent it out.
- Short sale.
- Loan modification.
- Walk away.
- Bankruptcy.
Before you do any of the above, however, consider whether or not you can afford to keep living in the home and making the mortgage payment. If you are reasonably sure that you can keep making your mortgage payments, it might be worth it to strap in and keep slogging along. At least for now.
Eventually, home values are likely to rise again
While you may not see the types of skyrocketing values that made the real estate bubble possible, it is likely (but by no means certain) that in 7 - 10 years your home’s value will have increased again not to mention the equity you will have built. And if you are planning on staying in your home for the long haul, as your personal residence, then you’ve made a purchase anyway — not an investment.
Another thing worth considering, at least in the short term, is that the Senate is expected to vote on the economic stimulus package tomorrow. This means that there is a strong likelihood that if you are creditworthy you will be able to score a 4% mortgage interest rate. This will lower your mortgage payment — even though it won’t really do much about your home value. Even without the economic stimulus package, efforts are being made to force mortgage interest rates lower, and that could mean refinancing opportunities down the road.
In the end, you need to decide what you are using your home for. If you can still afford the mortgage payments, and if you are primarily concerned with having it as a place to live and raise a family (and you don’t have a pressing reason to move), then it is probably worth it just to keep it and wait for the housing market to pick back up again.
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