Emergencies come at inconvenient times, and we should be ready to weather them. And when those emergencies come, we can find ourselves struggling to save. Up Next: Time To Spring Clean: Tips For Saving More Whether it is COVID-19 or any other emergency, follow these essential tips for saving during a crisis.
What to Do When Your Property is Underwater
If your property is underwater, there are options available to help relieve the burden:
While refinancing your KC home loan on an underwater property is not impossible, there are eligibility limitations. There are some programs available to refinance an underwater property like:
- Streamline refinance
- Home Affordable Refinance Program (HARP)
- Single Family Guaranteed Refinance Pilot
Remember that you will probably not be able to refinance if you are not up-to-date on your mortgage payments, or your KC home loan is backed by a different lender.
A KC home loan modification is different from a refinance in that a loan modification doesn’t replace the existing loan like a refinance does. Rather, it modifies your existing loan with a lower interest rate or by extending the loan term.
You can stay in your home and continue to make payments in hopes that the value of your home will go up. However, it is risky because it is very difficult (if not impossible) to predict future home values. So if you choose to stay, you must decide if you can realistically stay in your home and continue making KC home loan payments while waiting for home prices to rise. If not, you may have to rent out the property and look for another home.
Rent the Property
Renting out the property until the sales market improves can be a viable option. You can get enough rent to cover property expenses and eventually break even. Not everyone can rent out their home. The reasons being either your homeowners association forbids it, or you cannot afford to maintain it.
If the aforementioned options are not feasible, you can opt for a short sale. A short sale occurs when you and the lender decide to sell the property for less than the amount owed rather than foreclosing. Before short selling, be sure to:
- Get your lender’s approval
- Understand the consequences
- Continue paying homeowners association dues
Foreclosing your home should be a last resort measure. By “strategically defaulting” on your home loan in KC, you simply stop making payments even if you can afford to stay current. Some homeowners choose to do this because the home is a bad investment and they want to wash their hands of it.
Naturally, consider the consequences of foreclosing like:
- Credit score damage
- Unpaid debt is taxable income