There are homeowners who are still struggling with negative equity as a result of a drop in property value but despite the fact that it’s been reported that around 22% of homeowners have a problem with negative equity, there remains few opportunities for these men and women to find a solution that may offer more affordable payments or a reduction in the principal amount they owe. However, the proposals and potential changes that may come for homeowners in a negative equity situation have been covered over the past weeks but nothing concrete has been offered as of yet, but homeowners are still in a position where using short sales to address their underwater problems has offered some benefits but there are also drawbacks of which financial advisers want homeowners to be aware.
Obviously, homeowners who are in a situation where they owe more on their home than it’s actually worth may be frustrated as we have continued to see rates on home loans drop, with the most recent reports indicating that some rates on mortgages have remained at or even below 4%, and if negative equity homeowners had the opportunity to refinance in this current market it could save them a great deal or make their mortgage payments much more affordable. However, homeowners have been looking for a short sell opportunities in some cases as this would allow them to transition from their home when falling value has become a problem and there are seemingly few opportunities for their specific circumstances that may offer more affordability.
Short sales can be helpful because they will allow a homeowner to transition from their home without having to meet costs associated with their home, like continued mortgage payments or even the difference between what a home is sold for and what was originally owed, as many servicers are willing to work out these agreements simply because they are having trouble selling foreclosed properties and would rather either keep a homeowner in their home or at least work with the homeowner to find a buyer. Furthermore, there have been some indications over the past month that certain servicers are willing to pay homeowners relocation assistance, which is common in programs like the Making Home Affordable initiative or even from some state housing agency Hardest Hit Fund plans.
What homeowners do need to be aware of is that there are some reports that show that a short sale may cost a homeowner points on their credit score, as there are some former homeowners who have seen their credit rating drop substantially after participating in a short sale. Others say, this may be the case because some homeowners are financially distressed and have missed payments on other debts or have missed mortgage payments leading up to a short sale, but as short sales are being sought still by certain homeowners, advisers are attempting to make these homeowners more aware that even though there are some benefits that come with selling a home at a loss, there are potential personal financial repercussions that must be considered before a homeowner takes this particular route when dealing with their underwater mortgage.