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How to Get Out of an Underwater Mortgage

underwater mortgage

An underwater mortgage, where the outstanding balance on your mortgage exceeds the current value of your home, can feel like an overwhelming financial burden. While the situation may seem challenging, there are viable strategies to navigate through it. In this blog post, we’ll explore effective ways to get out of an underwater mortgage and regain control of your financial future.

  1. Evaluate Your Options:

Before taking any action, assess the severity of your underwater mortgage situation. Consider the current real estate market, your long-term plans, and the feasibility of continuing with your current mortgage. Understanding the extent of the problem will help you choose the most suitable solution.

  1. Refinance Your Mortgage:

Explore the possibility of refinancing your mortgage to take advantage of lower interest rates. While this option may not directly address the negative equity, it can help reduce monthly payments and make the mortgage more manageable. Be aware that refinancing may come with closing costs, so carefully weigh the potential benefits against the associated expenses.

  1. Loan Modification:

Contact your lender to discuss the option of a loan modification. This involves negotiating changes to the terms of your mortgage, such as the interest rate, loan duration, or even the principal amount. Lenders may be willing to work with you to prevent foreclosure, especially if your financial hardship is temporary.

  1. Make Extra Payments:

While making extra payments may seem counterintuitive when dealing with an underwater mortgage, it can help build equity over time. Applying additional funds to the principal each month accelerates the repayment process and may help offset the negative equity. Consult with your lender to ensure any extra payments are applied correctly.

  1. Explore Government Assistance Programs:

Look into government programs designed to assist homeowners facing financial challenges. For example, the Home Affordable Refinance Program (HARP) was created to help homeowners with Fannie Mae or Freddie Mac loans refinance their mortgages, even if they were underwater. Research and check eligibility criteria for programs that may be applicable to your situation.

  1. Consider a Short Sale:

In cases where other options are not viable, a short sale may be a last resort. With a short sale, you sell your home for less than the outstanding mortgage balance, and the lender agrees to forgive the remaining debt. While this option can negatively impact your credit score, it may be preferable to foreclosure and allows you to move on from the underwater mortgage.

Dealing with an underwater mortgage requires careful consideration and proactive steps. Remember that you’re not alone, and various options are available to help you navigate this challenging situation. Consult with financial advisors, explore different solutions, and take decisive action to regain control of your financial well-being. With the right approach, you can work towards freeing yourself from the burden of an underwater mortgage and pave the way for a more stable financial future.

If you need help selling your home to avoid going into an underwater mortgage, or if you’re already in an underwater mortgage situation and you’re looking for more advice on how to get out of it, call buyerhouse at (901) 459-3007 today. We are trusted cash home buyers in Memphis and will give you our honest opinion on the value of your home. Interested in learning more? Give us a call or fill out the form below!

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