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Debt Relief and Foreclosure
By Vic Hurlstorm | July 9, 2009
Since there are many people unemployed right now, many homeowners are unable to keep paying their mortgage payments. Some of them have good rates but still, without income, they still cannot keep up. Some homeowners have adjustable rate mortgages and find their home payments adjust to twice what they were paying. Many homeowners cannot afford to stay in their current homes so they must sell and move on. However, with home prices falling sharply, they also find themselves having upside down mortgages. That means, they owe the mortgage companies more than their homes are worth. So, what can they do?
Is Selling an Option?
The first thing that comes to mind for lots of 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. Therefore, selling might not be the best thing for them. But, it is a good idea to consult a Realtor to make absolutely sure that there is no 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.
Should Homeowners Refinance?
Often when you owe more than your home is worth, banks will not lend. But, there might be options that allow you to refinance your house or modify your loan especially when the rates are really low right now. If you have good or fair credit and want to explore the option of refinancing or have any home loan questions, call your mortgage company as well as other mortgage companies for comparison. Sometimes, your own bank might not have the resources to help you but other banks may be able to.
Debt Relief After Foreclosure
A lot of homeowners cannot sell their homes, cannot refinance and cannot modify their loans. Soon their mortgage companies try to foreclose on them. Foreclosure severely hurt your credit so you need 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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