What is the best solution for someone who is upside down on your mortgage?

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On the basis of our economy today, most people bought their house on the loan amount, compared to what their property is worth now. Their property is worth less than what they owe to banks. Is there a solution? The fact that they are due and payable, or late?

7 Comments
  1. Reply
    Mel M
    May 16, 2011 at 5:31 am

    Some people who purchased homes during the past year or two as well as those people who took out large home equity loans in the same period are finding themselves “underwater” (also called being upside down in a loan). You’re right, their property is worth less than the total amount they owe to the bank. The only way this situation will change is for home values to increase, which takes time. It could be a year or two or it could take longer.

    You can’t refinance for a lower loan amount since the home has a lower value now than when it was purchased. You can, however, look into refinancing for a longer period of time at a lower interest rate. Making this change could lower your monthly payments.

    Late mortgage payments only make the situation worse. Being current on your mortgage will not “solve” the problem of being underwater, but it will not hurt you, either.

    The best advice for people who are upside-down on their mortgages is to keep making your mortgage payments in-full and on-time.

    Hope this helps. Good luck!

  2. Reply
    I Buy And Sell Houses
    May 16, 2011 at 6:13 am

    The best solution?

    Just keep paying your mortgage.

    There’s nothing fatal about being upside down on a mortgage. Let’s say you bought a house a few years ago for $ 350,000. You owe $ 340,000. Now it’s worth $ 300,000. Your payments are $ 2,000 a month.

    So what?

    You pay your mortgage. You have a place to live. Your credit is fine. And one day–maybe in 2 years, maybe in 4 years, maybe longer–the property will be worth more than $ 340,000. Even better, you’ll have paid down some of the principal on the mortgage. And then you won’t be upside down.

    The only problem that arises is if you need to sell the property while you’re upside down. You might need to sell if you’re transferred to another state. Or if you can’t afford the payments. In that case, you do have problems. If you fall behind on payments, options include a loan restructuring, loan forebearance, short sale, deed in lieu of foreclosure, or foreclosure.

    If you’re not behind on payments, options include renting the current property out, lease-optioning it, or using a land trust to accomplish something similar to a lease-option.

    But your question didn’t suggest financial hardship. For most people out there, the best advice is just to hang in there and make payments.

  3. Reply
    src50
    May 16, 2011 at 6:55 am

    The best solution is to keep paying your mortgage and wait for the housing markets to gradually recover. There is nothing “wrong” with having negative equity, nor does it entitle you to walk away from your commitment.

  4. Reply
    johnson.gary15
    May 16, 2011 at 7:02 am

    I had a friend that used the Property relief program. He had a loan for 300k, on 30yrs with $ 1200 payment, his house worth ed for only 200k, and he was current on his payment. after dealing with property relief, they purchased his mortgage for 190k, and now his making payment for the new loan, his payment dropped, and when the market goes back up, he has that extra money.
    they suggested him to pay his payment, till they finish the deal with his bank, and the whole thing took about a month and half.
    I think you should contact them too if you are upside down.
    their service is nation wide, and they have strong banks, i have an email address for one of their agents:
    aaron@r-aconsulting.com
    good luck

  5. Reply
    estielmo
    May 16, 2011 at 7:10 am

    The mere fact of being upside-down is meaningless. It is a theoretical number on paper.

    Anyone that buys a car on time is upside down the moment they sign the papers. A $ 49K Acura is worth $ 30 max one year later even as you still owe $ 40K on it.

    The question is not “are you upside down?” The question is “did you buy a house you could reasonably afford and are you able to make the payments?”

    The further question is were they so foolish as to get an ARM or Balloon Note?

  6. Reply
    Doctor Deth
    May 16, 2011 at 7:14 am

    if you’re living in the house and you have a job, you keep making payments – why should anything change?

  7. Reply
    Steve P
    May 16, 2011 at 7:52 am

    First try a loan modification to see if your bank will reduce the principal owed.  Even if you’re not late they should listen to you because their security (your eqyity) is now gone!  To get your loan modified however, you do need to be facing a genuine financial hardship and not just upset because you owe more on the house than its value!
    A short sale is also a possible solution if you’re willing to move.  This is where a bank accepts less that the amount owed from a new buyer.  This will affect your credit rating although not as badly as a foreclosure.  There may also be tax consequences so check with your tax professional.  Good luck!

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