If you purchased a home and its value has fallen significantly, you may struggle with understanding how to get out of the debt. If you keep paying on the mortgage, you’re throwing money away, because your home isn’t worth as much as the loan.
Paying on your home might not be problematic if you plan to stay there for a long time, but if you’re ready to move, having a home that isn’t worth what you can sell it for becomes a major problem. Fortunately, there are options that could help you.
Short sales are common when mortgages are underwater
It’s most common to see people attempt to go through short sales when their mortgages are underwater and they want to get out of the mortgage. A short sale is when you ask a lender to accept an offer below the value of the mortgage and to forgive any remaining debt that you would owe on the home.
Without a short sale, you would have to make up the difference between an offer and the remaining mortgage. While that might not be a big deal for a small difference, like $1,000 or $2,000, it could be a huge problem if you have a difference of $10,000, $50,000 or more.
Bankruptcy could offer you a solution, too
There is a possibility that bankruptcy could help, too. If you stop paying on the property, you could allow it to go through foreclosure. If you’re having other issues with debt, bankruptcy could help you free up more income while also deciding if you want the foreclosure to be completed or would like to negotiate new terms on your mortgage loan.
It is frustrating when your home isn’t worth what you’ve paid for it. While it doesn’t happen often, this can happen because of the economy taking a dive and affecting the real estate market or the local area falling into disrepair. Whatever the issue is, remember that you do have options. From allowing a foreclosure to occur to going through a short sale or bankruptcy negotiations, you may be able to renegotiate or eliminate your obligation to the debt.