Small Hope of Refinancing When Upside Down

With lots of people unemployed right now, many homeowners cannot keep up with their mortgage payments. Some people have good rates but, without employment, they still cannot keep up. Some homeowners have adjustable rate mortgages and find their home payments adjust to twice what they were paying. Many homeowners cannot afford to stay in their homes so they have to sell and move on. The problem is that, with falling real estate prices, they also find themselves having upside down mortgages. That means, they owe the banks more than their homes are worth. So, what are their options?

Should Homeowners Sell Their Homes?

The first thing that comes to mind for lots of homeowners is to sell and move on. However, if they were to sell their homes, they will get less for them than what they owe the banks. So, selling might not be the best option. However, it is a good idea to talk to a Realtor to make absolutely sure that there is no way to sell and walk away free and clear without having to come up with the rest of the money for the mortgage balance later on.

Is Refinancing an Option?

Often when you owe more than your home is worth, lenders are not going to lend. However, there might be options that allow you to refinance your home or modify your loan since the rates are very low right now. If your credit is good or fair and you wonder if refinancing is good for you or have any home loan questions, call your lender as well as other mortgage companies for comparison. Sometimes, your own bank may not be able to help you but other banks may be able to.

Debt Relief Act After Foreclosure

A lot of homeowners cannot sell their homes, cannot refinance and cannot modify their loans. Soon their mortgage companies file the foreclosure papers. Foreclosure severely hurt your credit so you need to call your bank and try to negotiate with them before they foreclose. If they do go ahead with foreclosure, however, there is the Mortgage Forgiveness Debt Relief Act of 2007 that will work on your side. This Act allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.