Debt Relief Act and Foreclosure
With many people unemployed right now, a lot of homeowners are unable to keep paying their mortgage payments. Some people have good rates but still, without jobs, they still cannot keep paying. 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 should sell and move on. However, with falling real estate prices, they also find themselves with upside down mortgages. That means, they owe the mortgage companies 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. However, if they were to sell their homes, they will get less for them than what they owe the banks. So, selling may not be the best thing for them. However, it is a good idea to consult a real estate agent 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.
Is Refinancing an Option?
Often when you owe more than your home is worth, mortgage companies do not want to lend. But, there might be options that allow you to refinance your home or modify your loan since the rates are historically low right now. If you have good credit and want to explore the option of refinancing or have any home loan questions, call your bank as well as other financial institutions for comparison. Sometimes, your own mortgage company may not be able to help you but other banks may be able to.
Debt Relief After Foreclosure
Lots 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 advisable to call your bank and try to negotiate with them before they foreclose. If they do go ahead with foreclosure, however, there is the 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.
