This week we are introducing a new voice on miOaklandCounty.com, Ken Mascia, President of Oxford Financial in Birmingham. If you have questions for Ken’s finance articles, please send them. If you find yourself owing more than your home is worth, you can contact Dmitry and Maureen, and we will try to help you.
That’s a tough spot to be in pal. With today’s real estate market and some very aggressive mortgage lending tactics, this has become all too common. Many lenders encourage people to borrow all of their equity and in many cases, on an interest only loan! This is truly a recipe for self destruction. When you owe money, the general idea is to try to pay it back. At least that’s what Mom always said. Anyway, if you’re in this situation, for whatever reason, what are your options?
One option that should not even be considered is stopping making payments on the house and giving it back to the bank! Otherwise known as foreclosure. The bank can still go after you for the shortfall after the house is sold. Plus, your credit will be destroyed. Not cool.
Another possibility is renting the home to someone else so you can go out and buy a new house. This will work great as long as you can get enough rent to cover most, or all, of the house payment.
If you really have to get out of the house, then you may have to sell at a loss. In some circumstances, it may make sense to bring money to closing to get out of the situation and move on with your life.
Maybe your lender will allow a “short sale.†This is when the sales price does not cover the mortgage payoff and your bank agrees to eat the difference. Doesn’t happen often, but it may worth at least a phone call to see if they would consider it. This would probably only be allowed if your having some financial trouble and the bank feels it’s the best way out for them.
As a last resort, you may be able to voluntarily give the property back to the lender. This is known as “Deed in-lieu of Foreclosure†and is generally only done if you are behind on your payments and the bank agrees to take the house back. This is not nearly as damaging to your credit as a foreclosure. A call to your lender can determine if this is a possibility.
Finally, watch out for scammers! Someone may offer to buy you out of the house and take over your house payments. Never give someone else the responsibility to pay for your loan. If they don’t make the payments, you are the one who gets foreclosed on and your credit is ruined – not theirs. If someone offers to do something to get you out of this mess that sounds too good to be true – it is!!
When you need assistance with financing your next purchase or refinancing your existing home, please call Ken Mascia directly at 248.644.1200
[tags]mortgage, finance, upside down, debt[/tags]
Written by Ken Mascia
Prime Capital Mortgage, 248.644.1200
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G.A.M. 11.30.07 at 10:27 am
Thank you for posting this information. It was very informative.
armille 03.14.08 at 1:38 pm
I am upside down in my mortgage. I bought house with a 90/10 loan. I’ve been late on payments and just stopped foreclosure. is there anybody that can help me?
nancy layher 04.16.09 at 8:55 pm
facts-house would appraise for $260,000.00 i have first 6.2-owe $211,000.00. have an equity line maxed at $85,000.00-credit cards maxed of $52,000.00. i have talked with many lenders-wells is the lst and 2nd. they would refi the lst but that doesn’t help the delima-my mother with gift us $40,000.00 so we could qualify-fha-but i believe they would want the cards paid off. cannot do.i have 5 children and only gross 4,000.00 a month. my mother paid $447,000.00 for the home and we really want to stay in it. i believe that there must be some way. i saw you one line-please call-916-362-5484 thank you