Escaping the mortgage is the dream of many homeowners who can’t afford to make payments. Debt, medical bills, job loss, and divorce are most often the reasons why people want to get out of the mortgage. Whatever your reason may be, there are ways to get out of your mortgage, but you must keep in mind that some of them can damage your credit.
1. Sell the property
Selling your property is one of the fastest, best and simplest ways to get out of your mortgage. Pay off your load by using the proceeds but be prepared that the process of selling your home will take a while. From preparing and listing to selling and closing on a sale, several weeks can pass. Unfortunately, it’s not likely that you’ll manage to sell your home for more than the amount you owe. Home equity is an important factor in paying off the loan, and you might not have enough if you have recently bought your house.
2. Let your lender have the ownership
Turning over the ownership to your lender might be one of the best ways to get out of your mortgage and avoid foreclosure. Deed in lieu, which is the name of this arrangement, requires you to convince your lender to release you from the mortgage in exchange for the deed to your property. You will probably need to prove that you can make the payments, and as the borrower, you don’t have to prepare and list your property. This can damage your credit, however, it is better than an actual foreclosure. Unfortunately, there’s a catch though. The lender doesn’t have to accept your offer and might decide that a traditional foreclosure is better for them. Another downside is that you will have to pay the difference if the lender sells your house for less than your loan’s balance.
3. Get foreclosed on
Foreclosures happen when you are behind on payments so far that the lender forces you to vacate. You will get foreclosed on if you stop paying, and it will damage your credit. You won’t be able to buy another house for years, and you’ll have to find another home. However, the legal process often takes a long time, so months and years may pass before you actually have to move out of your home. During this time you might manage to discuss things with your lender and come to an agreement so that the foreclosure would stop and so that you could stay in your home.
4. Use the short sale technique
If the worth of your home is less than the balance of the loan, a short sale might be the best idea. This is a method where you convince your lender to let you sell your home for a smaller amount than the balance of the loan. The lender will accept the proceeds, and you’ll prepare, list, sell your home and move out once the process is done. However, the lender might not agree to this arrangement, and in some states, they might even sue you because of the shortfall.
5. Rent the home
One of the ways to get out of your mortgage is to rent your home for the amount that can cover the payment for your mortgage. You won’t really get out of your mortgage, but you’ll deal with payments much easier. This might even be the best solution because you’ll stay the homeowner, you don’t need your lender’s approval to rent, and it can all be done pretty quickly. The downside of this method is that you’ll have to live somewhere else in order to rent your home. You might consider moving in with your relatives or paying cheaper rent. If the reason why you’re looking for ways to get out of your mortgage is job loss, you might be able to afford to make payments without having a tenant once you find a new job.
6. Ask the lender to modify the load
No one likes foreclosing, including the lenders, since this is a very long and costly process. This is why your lender might be willing to give you a break as long as you’ll keep making payments. Your lender can modify the load, extend the term or reduce the interest rate. As long as the loan modification reduces the payment enough that you can afford it, everyone will benefit from this arrangement. Unfortunately, your lender might not modify your loan, but it doesn’t hurt to ask.
7. Walk away
In the end, you can always just walk away. It might be your only choice if you can’t get a loan modification, can’t rent your home for enough money to make payments, and can’t sell it. Don’t just disappear though, and let your lender know about your plan. They might suggest another option. Just like with the ways to negotiate with your cable TV provider, threatening to cancel can help you get a better deal.