Owning a home that is worth less than you paid for it is bad. A mortgage with a combined balance or individual balance that is greater than the value of your home only makes matters worse. If this is the case then you have a negative equity mortgage or an upside down mortgage, whichever you prefer.
Most people who have a negative equity mortgage or an upside down mortgage don’t know what to do so often times, they do nothing. If you are looking for ways to reduce your mortgage balance be prepared for some heartache, it’s not going to happen easily. There is no easy way to handle an upside down mortgage so just be patient.
Balance reduction requires leverage and one of the only leverages pieces that homeowners have is the payment they pay to their lender. payments on time then there is no incentive for the lender to help you. payments could be an option, but explore this area carefully. Get your lender to work with you and gain some leverage. This is why you hear from many different sources that missing your payments is the only way to get your lender to work with you. If you want leverage, miss some mortgage payments.
Now I can’t tell you to miss your mortgage payment but if you decide to do so you are heading down a path where you begin walking that fine line between foreclosure and homeownership. You just need to know that there is a chance you could lose your home if you can’t generate the desired leverage.
The best chance you have at getting your lender to work with you is to have two mortgages. The second mortgage is more prone to risk and exposure if you were to foreclose on your property. Settlement of your balance is the outcome here if you focus your attention in this area and that is a very good thing. Good news is the lien will disappear but when you charge off the balance it will end up as a collection account in the end.
When you look at refinancing an upside down mortgage you need to look only at the first mortgage only. Look at who insures your loan and who services it, typically who you make your payments to. If it is either Fannie Mae or Freddie Mac you could potentially have the ability to refinance. There are additional guideline and criteria that need to be met but this is a very good opportunity to reduce your interest rate and solidify your mortgage terms.