Underwater mortgages have become a problem for many homeowners as certain areas of our nation has seen drastic drops in mortgage property values. It’s understandable that when a homeowner owes more on their home than their home is worth, trouble may arise when it comes to meeting mortgage payments or for homeowners who see their home as an investment they may simply be looking for a way out of the situation.
Principal reductions have been asked for by many homeowners but it has been documented that many mortgage lenders are unwilling to offer reductions on principle values and would rather offer other forms of assistance to homeowners with an underwater mortgage. While principal reductions are argued to be the only fair option since many homeowners believed they were sold a house with an inflated property value, again, lenders feel that principle reductions are unhelpful and should not be used on a wide number of homes that have lost value.
In all fairness, there have been some principal reductions made by mortgage lenders over the past months for homeowners who are in a particularly bad situation, but some homeowners have chosen to short sell their mortgage so that they may be free of their underwater mortgage commitment. While some homeowners seek to short sell their home do because they can no longer afford their mortgage payment because of their home’s decrease in value, others who feel their home is an investment believe that they have simply lost out and cannot make a profit from the sale of their home in the future.
While strategic defaults have been problematic for some mortgage lenders, these short sell options may allow homeowners to rebuild their financial life much easier than if they strategically default and suffer a large hit to their credit score. It’s understandable that when a homeowner walks away from their mortgage obligations, be it an underwater mortgage or not, this is reflected poorly on their credit history, which could make it difficult for them to purchase another home in the future.
Yet, short sales have been a way that homeowners have been able to rid themselves of a bad situation without taking any irreparable damage to their financial life, which again, could make homeownership an option once again in the future.