Keeping Your House

If you have a steady income, then you probably will be able to keep your home. However, if your income has been substantially reduced, you have lost your job or are disabled or ill, you may not be able to keep your house if you don’t have enough income to make the mortgage payments even if you refinance or obtain a mortgage modification.

Analyze Economic Situation

Determine Your Home Equity

In order to determine the approximate equity in your home, you need to contact a Realtor and have them do a comparable market analysis for you to determine how much your house is worth in today’s market if you were to sell the property.  Next you need to know the amount you owe on your loan balance. If your house is worth more than what you owe, then the difference is the approximate equity you have built in your home.   If you owe more on your mortgage than what your home is worth, then you are going to be upside down on the mortgage.

Affording Future Mortgage Payments

In these uncertain economic times, it is hard to know whether or not you will be able to afford future mortgage payments, as your financial situation may change for the better or for the worse. It’s a good idea to have at least 6 months mortgage payment put away for a rainy day.

Reducing Debt

Bi-weekly payment plans, paying extra principal payments and interest only loans if you plan to keep the house less than five years are ways to reduce your mortgage debt.  Another concept that might help you reduce your mortgage debt and pay off your mortgage in 10 years is called mortgage cycling. To accomplish this, you will need to make large payments of at least $5,000 twice a year. If you have the extra cash, then this works strategy will work well for you.  However, most homeowners today do not have all that extra cash so they would use a revolving Home Equity Line of Credit to accomplish the same thing. Frequently this type of plan is referred to as a mortgage accelerator.  How mortgage cycling works is you are paying down the principle and the interest is then less based upon a lower principal balance. But it is risky and not for everyone especially if you don’t have enough cash flow. Also, if the market prices continue going down, you could lose all your equity and not be able to afford the mortgage payment and the equity loan payment and ultimately lose your home.

Should You Let The House Go?

House Depreciation

If your house has depreciated significantly and you owe more on your mortgage than the house is worth, it may make more sense to just let the house go back to the bank by signing a deed in lieu of foreclosure or letting it go to foreclosure if you do not have the money to make the monthly mortgage payments.  A foreclosure will ruin your credit so before you make any final decisions, talk it over with your attorney and find out what other options are available.

Little Or No Equality In House

Because many homes have gone down in value as much as 50%, a large number of homeowners have little or no equity in their homes. If you fall into that category and you are having trouble making your currently monthly mortgage payments or are in default, you may have no choice but to let your house go to foreclosure or try and sell it in a short sale transaction.  A foreclosure will ruin your credit so before you make any final decisions, talk it over with your attorney and find out what other options are available.

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