Introduction
Several years ago there was quite a shock to homeowners when they found out. The were left to figure out what to do when a home falls in price. This left many homeowners in underwater mortgage situations. This meant they now owed more money on their home than what their home was worth. When a home falls in value this makes it difficult for one to sell their home or refinance. Those who had gotten a mortgage thinking that they would just refinance to lower the rate in a couple of years, had to rethink their plans. When a home falls in value it leaves the owner feeling stressed and unsure of what to do. There are some tips to help those in these upside down mortgage situations.
Step 1
When the price of a home falls, the homeowner's best option if they can manage is to hold on and ride out the storm. If you were planning to sell, put that thought on the back burner if you can. Selling when the price of a home falls will not get you the best return on your investment. The only way selling during such a time is if the house is already paid off. Even then you will not get as much as you would otherwise in a good economy or housing situation, but you at least will have the option of being able to sell.
Step 2
If you find that you are struggling month after month to make the mortgage payment and do not feel you can hold on to the home, you might try renting it out. If the price of your home falls and you are in one of those situations where your mortgage payment is actually going to increase or you have been laid off and cannot afford your payments, try to find somewhere less expensive to live. Perhaps a small apartment for a year or with a relative. During this time rent the house out, use the rent to make the mortgage payment. This way after a year, when things are hopefully better, you can move back into your home.
Step 3
Speak to your lender. When the price for a home falls, the lender will sometimes work with the homeowner. You may be able to reduce your payments and modify your loan. Be prepared that this is time consuming and can be a lot of stress. You will be asked to fill out paperwork, submit a profit and loss statement and write a hardship letter. You may be asked to do this morning than once. Stick with it and keep at it. Check back with the lender often to be updated on the process.
Step 4
Tip 4
If you absolutely see no way to hold on to your home, speak to your lender about a short sale. This is where the lender agrees to allow the house to be sold for an amount less than what is owed. There are and have been many short sales on the market recently due to the many pricing home falls that have taken place.
