How to Walk Away from a Negative Equity Mortgage

Negative Equity Mortgage – Walking Away

negative equity mortgage, walking away

Negative equity mortgage can make it hard for you to remortgage or move to another house. In this case, you need to walk away from it. Here is what you need to know.

What is a Negative Equity Mortgage?

Equity looks at the amount you owe your lender vs the value of the property. The value already paid off is considered your equity. Negative equity is when the principal amount you currently owe your lender is more than the value of your home. For instance, if your mortgage stands at $200,000 and your property’s value is $ 160,000, it means that you have negative equity of $40,000.

In short, negative equity is when the total amount you plan to sell your home is less than the money you owe the lender. This happens due to several reasons. Maybe, you purchased your property when the industry was booming and there has since been a decline in market prices. Natural disasters can also take a toll on home value. Additionally, poor or no maintenance on your property could lead to negative equity.

Walking Away from Negative Equity

Even though walking away from negative equity may not be easy or quick, it may be the best decision to make. It will relieve you or many problems that come with negative equity. Here are ways you can walk away from it.

Sell your property the traditional way 

The traditional way of selling your home means that you work with a real estate agent who will help you market your property for sale. When using this option, you should understand the pros and cons.

Let the lender take back the property 

You can let the lender repossess your home, although most banks do not like to do this. The process takes a lot of time since you have to go through many steps before you hand over the home. You should also be ready for a considerable amount of paperwork.

Sell your property for cash 

One of the best ways to walk away from negative equity is by selling it for quick cash. Cash buyers are always ready to purchase the property, and it can take as few as seven days meaning you can be rid of the headache quickly. Fortunately, you won’t need to repair your home since cash buyers buy as-is. Also, you won’t need to pay any commission.

How Can I Refinance My Mortgage with Negative Equity

One of the toughest questions that most property owners face is how can I refinance my mortgage with negative equity? Much as it may sound challenging, there is a way out.

The government has a program called Home Affordable Refinance Program (HARP), which allows homeowners with little or no equity to get more affordable payments. In this case, you need to apply for the loan, which should also be underwritten by the lending team. Remember, not everyone qualifies for HARP. So, you should review your status before you apply.

The Bottom Line

From the above information, it’s clear that walking away from negative equity can be the best decision if you find yourself in the situation. Your primary focus should be to weigh the available options and know what works best for you. For best results, get a no obligation quote for a cash offer on your home as soon as possible.