Are you an "Underwater" Homeowner? What to Do if You Are
Although the housing market is heating up in many areas of the county, there are millions of homeowners who are still underwater on their home, meaning that they owe more on their mortgage that what the home is worth. According to some studies, as many as 13% of all residential properties with a mortgage may be underwater so if you are currently underwater on your home, you are not alone. If you are underwater on your home, you do have options, which we’ve pulled together below. Additionally, if you are underwater on your home, a call to your local lender may be a great option, as refinancing your mortgage could bring your relief each month via lower interest rates and monthly mortgage payments.
Stay in your home for several more years
If this is your forever home, there is less stress with being underwater. Markets change, real estate prices rise over time. If you love your home and neighborhood, being underwater now may not be a big deal in the long term.
Refinance your home
Refinancing won’t help you sell your home for more money, but it can help to lower you interest rate and save you money each month while you wait for your home’s value to rise. The federal government’s Home Affordable Refinance Program (or, HARP) was designed to help underwater homeowners, as many conventional mortgage lenders won’t refinance if you have less than 20% equity. Some will though, although you might have to take on private mortgage insurance with your refi. Calling a lender who specializes in refinancing underwater homes may be your best bet if you are interested in a refi without equity.
Think about getting your home reappraised
Are you underwater by a small margin only? How old was the last appraisal on your home? Have you made substantial improvements to your home, or have similar homes to yours in your neighborhood recently sold for more than your appraised value? If so, it might be time to have your home reappraised.
Although short sales may also be an option for underwater homeowners, the options outlined above are the ones which will preserve your positive credit history so that you are in the best place to apply for a refinance mortgage loan or new mortgage loan when you are ready and able to sell your current home.