When you are drowning in an underwater mortgage the threat of foreclosure looms around the corner. Many people succumb to foreclosure simply because they don’t know all of the options available to help get relief from their mortgages. There are short term and long term solutions to managing mortgage debt, the key is to know which is best for you.
Staying In The House
A typical mortgage loan modification can offer short term relief from mortgage debts for those experiencing temporary financial setbacks. A forbearance agreement can have your mortgage payments suspended for 6 months to a year while you get caught up financially. Other loan modifications include waiving delinquency fees or reducing the monthly mortgage amount for a specified period of time.
Refinancing a mortgage is a long term solution to mortgage debts as it lowers your monthly mortgage payment for the life of a new loan. When you refinance a mortgage you obtain a new loan with a lower interest rate, which results in a lower monthly payment than the previous loan. Refinancing can be a good choice for anyone who can afford to keep their home, but requires a lower monthly payment in order to do so.
Giving Up The House
A deed in lieu is a transaction in which you give over the property to the lender to satisfy the debt. It will not allow you to keep the property, but will protect you from having a foreclosure on your credit. If you are experiencing a significant or long term financial hardship this may be a good choice in order to get out from under a sinking mortgage without the damaging effects of a foreclosure.
A short sale is another way to stop a foreclosure and prevent the damaging effects. The lender agrees to allow you to sell the property in order to satisfy the debt owed. Generally, the lender agrees to accept less than what is owed. One thing to consider in a short sale is whether you have the funds to pay the deficiency balance if required.