Help with an Underwater Mortgage

Holding an underwater mortgage can easily leave you in a position where you’re looking for help with saving your home; luckily there is help out there. The key is to know where to look and which help is actually for you. To get a better idea of what’s out there, let’s take a look at some options.

Refinancing Options for Underwater Mortgages

If you have an underwater mortgage, you most likely will not be able to refinance your loan in the traditional sense because while you can refinance to lower your interest rates, you can’t refinance downward to reflect the lowered price of your home. So if you have a loan for $300,000 that you owe and the house is now worth $200,000, you can’t refinance to make your new loan match the $200,000 property value.

However, there may be some options that you can take advantage of to refinance in a less traditional sense and help with saving your home:

  • Pay your mortgage down first. If you have enough cash on-hand, you can pay your mortgage down below the value of your home, then inquire about refinancing at the new loan amount.
  • Utilize a hard money lender. If you don’t have cash on-hand to pay down the mortgage on your own, you may be able to work with a hard money lender to do it for you. A hard money lender is a private investor that lends money to both homeowners with an underwater mortgage or those facing foreclosure.

Letting Your Home Go

Another option that you can take if you have an underwater mortgage is to let your house go. Of course, this option doesn’t fall into the category of getting help with saving your home; however it does offer help with releasing your financial responsibility. Here are a couple of your options:

  • Sell your home. If you conduct a short sale of your property (selling it for less than it’s worth) you can relinquish your responsibility of paying off the mortgage.
  • Agree to a deed-in-lieu of foreclosure. This agreement essentially signs your mortgage back over to the lender, relinquishing your responsibility; however, in this scenario you will have to suffer the same credit consequences as the standard foreclosure.

Whatever choice you decide to make, it’s good to know that you can get help with saving your home if you have an underwater mortgage.