Since there are lots of people unemployed in this bad economic time, a lot of homeowners find that they are unable to keep paying their mortgage payments. Some people have low rates but, without regular income, they still cannot keep paying. Some homeowners are worse off and 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 need sell and move on. However, with real estate prices dropping sharply, they also find themselves having upside down mortgages. That means, they owe the mortgage companies more than their homes are worth. So, what can they do?

Should Homeowners Sell Their Homes?

The first thing that comes to mind for a lot of homeowners is to sell and move on. But, if they were to sell their homes, they are likely to get less for them than what they owe the mortgage companies. So, selling may not be the most logical choice. But, it is a good idea to consult a real estate professional to make sure that there is not a 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, lenders are not likely to lend. But, there could be options that allow you to refinance your house or modify your loan especially when the rates are extremely low right now. If you have good credit and want to explore the option of refinancing or have any home loan questions, call your mortgage company as well as other financial institutions for comparison. Sometimes, your own mortgage company might not help you but other banks may be able to.

The Result of Foreclosure

A lot of homeowners cannot sell their homes, cannot refinance and cannot modify their loans. Soon their mortgage companies file the foreclosure papers. Foreclosure severely hurt your credit so you should 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 work on your side. 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.