Homeowners who are in a situation where they are facing negative equity on their property have, in certain cases, seen difficulties arise when it comes to meeting their monthly mortgage payment. Obviously, homeowners who are having trouble paying their mortgage due to a drop in their home’s value have been seeking ways to make their mortgage more affordable through underwater refinancing plans or principal reduction options.
Yet, some homeowners have been able to continually meet their monthly mortgage payment obligation but have seen their property’s value decrease to such an extent that they simply feel that walking away and taking a hit to their credit score is their only option. However, homeowners are strictly advised not to walk away from their home while an underwater situation is in place, as this could cause not only trouble for the housing market overall, but it will do a great deal of damage to a homeowner’s credit score and could prevent them from qualifying for another home for years down the road.
However, refinancing plans from governmental programs, the FHA, and even some state-specific initiatives may be available to certain homeowners and will assist them with the affordability of their home. While underwater refinancing is not solely available to homeowners who are having no trouble making their mortgage payments, certain refinancing plans for homeowners with a negative equity situation do require that a homeowner be current on their mortgage.
Many homeowners have sought out these underwater refinancing plans simply as a way to avoid missing payments in the future as an affordable mortgage payment can be helpful in instances where homeowners may be able to meet their monthly mortgage payment obligation, but still may be struggling in their financial life.
Refinancing plans do differ, especially those which have been implemented by various state housing agencies through the Hardest Hit Fund, but there are also options from plans like the FHA short refinance program that may not only offer homeowners the opportunity to get a more affordable mortgage payment, but could bring a principal reduction as well.
Also, other mortgage principal forgiveness plans, like the Principal Reduction Alternative plan, which is an extension of HAMP, may be able to provide some form of relief for homeowners who are facing an underwater situation. While these underwater refinancing and principal reduction plans have not been available for everyone, they are currently in place and can be of assistance through government programs or national mortgage servicers.
Yet, homeowners need to understand that in many cases options like principal reductions will be at a servicer’s discretion and may not be available to every homeowner who has negative equity in their home.