If you bought during the peak of the real estate market, the value of your home may have decreased in value and is said to be underwater. In other words, an underwater mortgage has a higher outstanding principal balance than the market price of the home. Homeowners with little or negative home equity can find themselves in this situation when property values fall, even when they’ve made all payments on time. It’s also referred to as being “upside down” or having “negative equity” in the home.
When you can’t find a better option for your underwater mortgage, there are times when walking away from a mortgage is the best option. This is called a strategic foreclosure; it is not recommended that you attempt this process without first consulting with an experienced attorney.
Here are a few questions to ask yourself or go over with your attorney:
- Are you stressed out about your mortgage payments?
- Do you have little or no equity in your home?
- Have you had trouble trying to sell your house?
- Is your home sinking under the waves of the real estate crash?
- What if you could live payment free for up to 8 months or more and walk away without owing a penny?
It is important to contact a qualified mortgage modification lawyer to discuss potential consequences of “walking away” from your home. Consequences vary case-to-case. However, in California the law is generally favorable to the homeowner/borrower.