How to Deal with an Underwater Mortgage Without Defaulting
Getting large loans as a mortgage is a very responsible step that should be carefully considered. However, even with thoughtful analysis, the buyers are not immune from the fact that real estate prices can go down. And in this case, if they have just begun to pay off their debt, they may find themselves with an underwater mortgage, which can poison life and deprive owners of peace of mind. Should you despair in such a situation, and what measures can be taken to smooth it?
Фото: IStock
When Does an Underwater Mortgage Situation Occur?
There are a lot of reasons why a house can significantly lose value after purchase:
- The generally unfavorable situation in the country in the field of real estate;
- Natural disasters that negatively affected its condition;
- Construction of environmentally harmful enterprises nearby;
- Improper maintenance during operation, and much more.
In any of these options, a situation arises when the payment on the debt exceeds the current value of the house. This is the underwater mortgage that many buyers fear.
What to Do with the Negative Equity of Your Home?
The first thing to understand is that you are not alone in such a situation and millions of Americans have been and are still experiencing it. This discovery is important not only for overcoming possible despair. This is stimulating the search for solutions out of this condition. Here are just a few of the routes you can take:
- Refinance your mortgage through various government or banking programs;
- Put greater effort into building more equity;
- Sell the house and quickly pay off the negative equity;
- Opt for a short sale process;
- Declare yourself bankrupt, etc.
Consequences of Defaulting on Mortgage Payments
The option of not paying the mortgage in the event of an underwater situation is the worst for many reasons:
- You will lose a house for which you have already paid off part of the debt. Lenders will rush to sell it to other owners so as not to lose even more money.
- Credit history will be significantly damaged. Of course, if you need a payday loan, you will get it, because lenders who provide such a type of loan often do not check borrowers in credit bureaus. However, if you need loans of large sizes, you will most likely be refused. So, if such a situation arises, visit the Payday Depot platform, which allows you to choose among a variety of creditors who will not require a «hard check” of your credit report.
- If a foreclosure situation arises, you will not be able to get another mortgage for about 7 years. And that means you’ll be paying rent to another landlord instead of using that money to pay for your own home.
Considering all these negative consequences of a payment default, it is better to choose any other of the available options. Even if at first glance, they seem laborious, in the end, you will gain much more than if not paying. Talk to a professional consultant and develop the most effective course of action that will save you in a mortgage underwater situation.
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