Upside Down on Your Mortgage? Explore Your Options Before Making a Move

According to a report released in March of 2009, approximately 8.3 million mortgage borrowers in the United States are upside down with their mortgages. Being upside down, or underwater as it is commonly referred to, means you owe more on your mortgage than the property is actually worth. For those who are stuck in this situation, getting out from underneath the loan can seem impossible. Fortunately, there are a few options available to those who owe more on their loans than the home is worth. Here are a few options you might want to explore if you are in this situation.

If you are upside down with your loan, one of your options is to simply stay where you are. From a financial perspective, this is usually the best option. After all, when you purchase a car, you are automatically in an upside down situation, so it is not like this is a highly unusual scenario. So, if your personal situation allows for it, sit tight until the value of the house recovers.

Another option is to complete a short sale with your lender. With a short sale, your home is sold at its current market value and the lender writes of the rest of the loan. Of course, this will take some negotiating with your lender to make a short sale happen. In addition, completing a short sale will reflect negatively on your credit rating, though it is still better than having a foreclosure on your credit report.

If your lender is not willing to negotiate a short sale or if this simply isn't a good option for you, you might choose to complete a voluntary foreclosure instead. With a voluntary foreclosure, you willingly surrender your home's deed to the lender. Obviously, this will still reflect poorly on your credit. But, initiating a voluntary foreclosure puts more of the power into your hands and allows you to decide when you are ready to cut your ties with the home.

If you really need to move, but you don't want to sell the home at a loss, you might also want to consider renting out the home until its value comes back up. Even if you aren't able to rent the home at a rate that covers all of your expenses, it still might be a better option than taking a huge financial hit in a down economy.

If you are only slightly upside down with your home and if your real problem is that you are having trouble making your payments, you might want to consider refinancing the home so the payments will be more affordable. With the help of Making Home Affordable, you may be eligible for a loan for up to 105% the value of the home.

The bottom line is that you have many options if you are upside down on your mortgage loan, so examine your situation carefully and explore all of your options so you can be certain to select the option that is best for you.