If your home is underwater, you have probably wondered what the best options are regarding this dilemma. A situation where home value has fallen below what is owed on the home is bad news in many ways. Primarily, it discourages a homeowner from selling their home unless they have funds available which would cover the loss they would take. It becomes much more difficult to qualify for refinancing.
Luckily, according to a recent LA Times story, the future is brightening for struggling homeowners: “The Santa Ana research firm CoreLogic estimates that the number of homeowners in the U.S. who owed more on their homes than those properties are worth totaled 10.8 million American households, or about 22.3% of all homes with mortgages, at the end of the second quarter. That was an improvement from the first quarter, when there were about 11.4 million underwater homes, amounting to about 23.7% of all mortgaged homes.”
CoreLogic economist Sam Khater said in an interview. “There is a material increase in equity, really the first since the collapse in the housing market, and that is a very good sign.”
This is great news for homeowners across the nation. However, while signs of progress conjure up a less bleak future for the housing market, there are still plenty of people who are suffering beneath the burden of an underwater mortgage. The question for them is what's next? When home values dip below mortgage debt owed, it is crucial that all the best options are considered.
If your home is underwater, the following options could be worth evaluating to improve your financial outlook:
- Continue to pay – As mentioned above, the current trends show that the housing market is improving, and may continue to do so. For those who like their home and can still afford payments, staying put could be the best option.
- Pursue a Loan Modification – A modification to your mortgage would allow you to keep paying down your mortgage, but at reduced rates. This is also an acceptable situation for a creditor, as the money they lose to a reduced rate is less than if the borrower were to foreclose. When people begin to get into trouble with their mortgage their Chicago bankruptcy lawyers may recommend this course of action, and they may also be able to assist with receiving a modification.
- Refinance – A refinance is an excellent option if you can afford it and if you qualify. With the current bargain basement status of interest rates, refinancing can save you a lot of money in the life of a home loan. Even the Chairman of the Federal Reserves recently took advantage of the low interest rates to refinance his home.
- Short Sale – If you're ready to walk away from your home or foreclose, a short sale could be a better option. To obtain a short sale you would speak with your lender about selling your home for less than you owe on it. What makes this option attractive to both borrowers and lenders is that borrowers can avoid going through the foreclosure process and having it appear on their credit report, while lenders can avoid the significant fees associated with foreclosure.
- Chapter 13 Chicago – Filing for chapter 13 is a good way to pay down your debt interest for free while still keeping your assets. You would need to make payments towards your debt for 3-5 years after which time you would be discharged of remaining debt.
- Washing your hands of the situation by walking away – Sometimes walking away proves to be the best solution. Walking away is the same as foreclosure. Although there is a negative effect on your credit score, it may be preferable to continuing to lose money on a home.
The lawyers at Suburban Legal Group PC understand how difficult it can be to deal with troubled finances. If your home is underwater, let us help you determine what the best options are and create a road map to dry off your underwater home!
DISCLAIMER: All information on this website are provided for informational purposes only and are not intended to be construed as legal advice. Suburban Legal Group PC shall not be liable for any errors or inaccuracies contained herein, or any actions taken in reliance thereon.
