Your Underwater Mortgage #1: Getting Rid of the Damaging Property

An underwater mortgage can seem like an insurmountable problem with no hope of resolution. However, if you are suffering under the weight of your underwater mortgage, there are things that can be done; it is possible to crawl out from underneath the rising debt.

In some cases, it may be possible to remain in the distressed home, but at other times, getting rid of the property is simply the best solution. If you have decided to relieve your debt by offloading the property, here are a variety of possible methods to achieve your desired result.

1. Sell the Home Quickly Through a Short Sale

If your lender approves the plan, a short sale can be a great means of selling a distressed property quickly and efficiently. Through a short sale, the property is sold for less than the amount owed on the mortgage, and lenders generally forgive the remaining amount. However, before deciding on a short sale, it is a good idea to consult with a qualified tax professional, as short sales can sometimes have significant tax consequences. Namely, there is often income tax associated with the forgiven debt amount. A real estate lawyer should also look over the short sale agreement to determine whether or not it leaves you responsible for the remaining mortgage debt amount.

2. Walk away from the Mortgage or Foreclose on the Home

A foreclosure can seem like the worst possible result of a mortgage debt. However, in some cases, it is the only possible solution. Both of these options will have a negative impact on your credit score, but in the long run your credit will rebound once you are no longer saddled with the outstanding debt. Foreclosure is typically a more secure option than simply walking away from the mortgage, because in those cases the bank may not always accept the house back. If that happens, as the homeowner you could still be responsible for expenses such as insurance, trash collection, or maintenance.