Sometimes, it becomes very tough for many of you to repay the mortgages. Repeated non payments ultimately lead many of you to fall into underwater. Remaining in underwater means that the amount of money that you owe on your mortgages is more than the value of your home. It is not very easy to get out of this situation. Here we discuss about some of the ways to get out of such situation.
Refinance
If you have negative equity in your home, a conventional refinance may not be the right choice for you. But if you have taken out a conforming loan and have no late payment in the past 6 months, then you may be eligible for Home Affordable Refinance Program (HARP). The HARP has been extended to the end of 2013. If you follow this program, your credit score does not get affected. But, if you are unable to pay your mortgages, you may end up losing your home.
Short sale
If you are under water, one good way to get out of that situation is to sell your mortgage short. In short sale, your lender agrees to an offer which is less than the amount of money that you owe on your mortgage. A short sale is also a very good way to avoid the serious negative consequences of a foreclosure. In short sale, your credit score is dropped by only 75 to 100 points. While opting for short sale you need to however check out the tax implications from a tax consultant. You need to see whether or not the forgiven debt is taxable.
Modification
If you are financially in a spot of bother and facing tough times to repay your loan, then a loan modification is a good choice for you. You can also opt for loan modification when you are underwater. The Home Affordable Mortgage Modification (HAMP) is there to help the troubled homeowners. In this program, your original mortgage loan is modified so as to make it more affordable to you. Sometimes, the rate of interest on the loan is lowered down which reduces the monthly mortgage payment. Term of the loan is also sometimes extended so as to offer you a lower mortgage rate.
Bankruptcy
If you are underwater, one option available before you is bankruptcy. Bankruptcy either helps you to eliminate your mortgage dues or you are offered a mortgage repayment plan under the supervision of the court. In chapter 7 bankruptcy, you get the chance to sell your non-exempt property to repay your mortgage dues. In chapter 13 bankruptcy, you are not required to sell your property. Here you are offered a repayment plan which allows you to repay your mortgages within 3 to 5 years.
If you are not able to exercise one of these options, then the axe of foreclosure falls upon you. In foreclosure, the lender has the legal right to forcefully sell your assets that you have kept as collateral. The sale proceeds are used to recover the remaining balance.