Is Your Mortgage Underwater?
You have an underwater mortgage if the total amount of your loan is more than the price you’ll get if sell your home. If your mortgage is in fact upside down, you’re not alone with more than nine million homeowners in a similar situation and generally the bigger the difference between your loan and the value of your property the more likely you’ll need to take aggressive steps to protect Your Foreclosure Options.
Because the underwater mortgage problem is so widespread, there have been several recent efforts by federal and state governments to force banks to address the issue. As a result, the recent Nationwide Foreclosure Settlement focuses almost exclusively on modifying home loans that exceed the value of the property. Read more about the Nationwide Foreclosure Settlement and the possible impact on your underwater mortgage.
As you may already know or can learn by reading our discussion on Foreclosure Options, many of the key foreclosure alternatives hinge on proving that you have an underwater mortgage. Once the bank is aware that the amount of your loan exceeds the value of your home, they’re much more likely to work with you. Read more about why Foreclosure Short Sales, Deeds in Lieu of Foreclosure and Loan Modifications often depend upon proving that you have an underwater mortgage.
There are several ways to find out what your home is worth including contacting a local realtor to discuss comparable sales in the area or using online sites like Zillow.Com which provides home “Zestimates”and others that help you determine the value of your home including Trulia, Realtor.com, Redfin and HomesDatabase.com.
Once you’ve confirmed that your loan is underwater, it’s time to decide what to do about it. For those of you who plan to live in your home permanently, it probably won’t matter how much your home is worth as long as you can afford the monthly payments. For many others however, an underwater mortgage translates to a bad investment and its a much easier decision to move to a more affordable home with a loan or rental price closer to its actual value.
Regardless of your next step, educate yourself on what your home is worth and what Foreclosure Options you may have as a result. Even if you have no plans on moving and aren’t yet involved in the Foreclosure Process, reducing the principal amount of your loan and pocketing the savings is tough to beat and probably worth the effort whatever the results may be.