In recent times due to the economic downturn many home owners are facing negative equity mainly because of the sudden drop in the value of the property they are possessing. Negative equity on homes occurs when there is reduction in the value of the property which has been used as security for a loan. These loans are mainly mortgages and if the owner of the same defaults in payment then the lender will not be able to recover the amount by selling it off as it would fetch much less in the market. The home owner too will not get the amount that could square off the mortgage and would still remain in debt. Under such circumstances you need to look out for options that are the best one for you as selling a house with negative equity may be the only way out in the end.
Exploring your options
You must understand the current market as this would largely determine the asset value of your home. If you are having a lot of debt it should occur to you that your ultimate choice is to sell your home. But this can be fraught with difficulties and bitter feelings as you will soon realize that you wouldn’t be able to get any more money on the home or get the right price from the market.
This will be even more precarious if you have taken second mortgage as many people do then in that case what you will get out of selling your house wouldn’t be anywhere sufficient and thus leaving you in debt for years. You should therefore try to avoid selling and slowly and steadily try to pay off your mortgage. Remember, your mortgage lender may legally pursue you to pay the remaining for even more than six years.
You may otherwise sell house in negative equity if you think that you could wait for another two to three years so that the property prices go up giving you some profit.
Other reliable choices
Some people resort to extreme action like declaring themselves bankrupt when all they need to do is to wait and struggle along the thin margin of keeping both income and expenses at home in check. The moment you declare bankruptcy then you will not get another mortgage. Again, living somewhere else including moving to a new home may incur additional expenses.
Also according to law your lender is still entitled to follow you till you clear the debt and this may even stretch for several years. Further, your credit ratings will fall and this will make your finance even worse. Better still it would be to take authentic and professional advice for selling a house with negative equity so that you may be able to get a reasonable option.
There are firms that may even take over your home for lease including your mortgage debt, interests and maintenance with a sale value of your home at some agreed time in the future for a reasonable market value.