What to Do If You Owe More than Your Home Is Worth
Do you owe more on your mortgage than your home is worth? Here are eight tips to help you stay afloat when your home is underwater.
You may need to sell your home because you need to move, because your current home no longer meets your needs, or because of a serious financial hardship, but the price you can get for selling it is less than what you owe on your mortgage. You may have borrowed against your home equity, but the value of your home has gone down since then. You've just found yourself "underwater" on your home, which means that you owe more on your mortgages and home equity loans or lines of credit than your house is worth.
Depending on your situation, you may be able to stay afloat if you follow these eight tips:
1. Find out where you stand.
Take a look at:
· How much your home is worth right now
· How much you owe on your mortgage or any home equity loans or lines of credit
· How much you might expect to sell your home for right now
· How much other homes like yours and other homes in your neighborhood are selling for right now
Ask a real estate, legal, or financial expert to help you understand your situation and your options.
2. Keep up with your payments.
If you can still make the payments, keep doing so. Late or missed payments can hurt your credit score, which can limit your financial options. Too many late or missed payments can lead to foreclosure. If you think you might fall behind on your mortgage, talk to your lender right away.
3. Talk to your lender.
Talk to your lender as soon as possible. The sooner you talk to your lender, the sooner you can get help and the more options you have. The longer you wait to talk to your lender, the fewer options you have.
4. Look into refinancing your mortgage.
You may be able to refinance your mortgage at an amount that is closer to what it's worth now. For more information about refinancing, visit our Mortgage Refinance page.
5. Consider selling your home with a short sale.
If you plan to sell your home, you may be able to make a short sale, which means that your lender accepts less than the full amount of what you owe on your mortgage. Ask your lender if a short sale is an option for you.
6. When all else fails, look into a deed in lieu of foreclosure.
If you still can't sell your home, your lender may accept a deed in lieu of foreclosure, which allows you to transfer ownership of your home to your lender instead of going to foreclosure.
Both short sales and deeds in lieu of foreclosure are last resorts, but they allow you to avoid foreclosure, which can hurt your credit score and cost you and your lender a lot of money and time.
7. Think about your taxes.
Some options available to you may affect your tax situation. Ask a legal or financial expert for advice about how these options may affect your tax situation and what course of action is right for you.
8. Protect yourself.
Make sure that you get any promises or details in writing, read everything carefully before you sign it, and ask a legal or financial expert to help you understand anything that isn't clear. Avoid signing anything that you don't understand or that seems too good to be true or too easy to do.
To learn more, visit our Payment Difficulties page.
These are general recommendations not applicable to all financial situations. Every financial situation is unique. Further, the suggestions and recommendations contained within the content provided are not an assurance of any future result. Be sure to discuss your specific financial circumstances with a legal or financial expert before you take action. Contact us for more information.
