Underwater On Your Mortgage? You Still Have Options

If you owe more on your home than what you could sell it for in present market conditions, you’re underwater on your mortgage. The situation can seem hopeless – pouring money into a property that will not yield a financial benefit, and which could actually damage your finances instead. However, consumers who find themselves in this type of mortgage mess do still have options.

Renegotiate Your Mortgage Terms

Lenders don’t like to advertise this option, but many are willing to renegotiate your interest rate, the number of payments left, or even the balance due on your loan. Federal government programs to keep people in their homes add to the lender’s toolkit in this area, and may make it possible to start fresh with completely new loan terms that remove you from underwater status. Remember: lenders have a vested interest in homeowners successfully paying off their home loans.

Take On Tenants

Although you likely never considered sharing your home with renters when you bought it, taking on tenants in the basement or even in a single room of the home could provide the extra income you need to cover your traditional mortgage expenses, and even enable you to put more toward your loan in an effort to pay down the mortgage debt faster.

Consider a Short Sale

You’ll likely want to get expert advice before pursuing this option, but a short sale is when the bank allows you to sell the house for less than what you owe. In some cases, you’ll still be on the hook for the remainder, but banks have also been known to forgive the additional debt in some cases.

The bottom line is that, even though you may feel stuck, an underwater mortgage doesn’t have to be a hopeless situation. Examine all your options and determine a course of action that’s best for you.

Image via Flickr/donita9