Since there are lots of people unemployed in this bad economic time, many homeowners are finding it hard to keep paying their house payments. Some people have good rates but still, without income, they still cannot keep paying. Some homeowners have adjustable rate mortgages and find their home payments adjust to outrageously high amounts. Many homeowners cannot afford to stay in their homes so they should sell and move on. The problem is that, with dropping home prices, they also find themselves with upside down mortgages. That means, they owe the banks more than their homes are worth. So, what can they do?

Is Selling the Homes an Option?

The first thing that comes to mind for many homeowners is to sell and move on. But, if they were to sell their homes, they will get less for them than what they owe the banks. So, selling might not be the right choice. But, it is usually a good idea to consult a Realtor to make absolutely sure that there is not a way to sell and walk away free and clear without having to come up with the rest of the money for the mortgage balance later on.

Choosing to Refinance

Often when you owe more than your home is worth, mortgage companies are not likely to lend. However, there might be options that allow you to refinance your house or modify your loan since the rates are historically low right now. If your credit is good and want to explore the option of refinancing or have any home loan questions, call your lender as well as other lenders for comparison. Sometimes, your own lender might not want to help you but other banks may be able to.

The Result of Foreclosure

A lot of homeowners cannot sell their homes, cannot refinance and cannot modify their loans. Soon their mortgage companies start to foreclose. Foreclosure severely hurt your credit so it is wise to call your bank and try to negotiate with them before they foreclose. If they do go ahead with foreclosure, however, there is the new Mortgage Forgiveness Debt Relief Act of 2007 that will help you a little bit. This Act allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.

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