How To Refinance Upside Down Mortgage: How to Deal With an Upside Down Mortgage

2010 will be known as the year that everything changed for the Real Estate market. Waiting for this to happen has taken some considerable time and patience but now that it is here it’s time to take advantage of this situation. It has been talked about many times over, proposed in many forms but now the Short Refinance makes it possible to exchange an upside down mortgage into a right side up one! But how to refinance upside down mortgage ?

Sub-prime mortgages are designed for short term lending and you hopefully can afford a much larger home for the initial purchase and then later, hopefully, you have either decided to move or refinance to a fixed rate mortgage once your property has appreciated in value, allowing you to refinance using the market value of your home to offset refinancing costs. Unfortunately, the real estate forecast was not expecting our economy to take such a sour turn. This has caused otherwise good credit worthy homeowners to be upside down in their home’s equity.

We will need to negotiate with your existing lender to get them to agree to a short payoff. Not just anyone will qualify for this, of course, as we will need to demonstrate a need based upon some level of hardship. It’s important that this short payoff include both the first and the second mortgages and have a loan to value of approximately 95% of current appraised value.

For this, you really have to consult your lawyer since even if the bank forgives a loan, the IRS could evaluate the amount as taxable income. In some areas, mortgages are usually made on recourse basis, meaning that the bank could take the deed of the home but could not run after you for any balance due. However, check with your lawyer because this is not true everywhere. A better option than walking away is a deed-in-lieu where the bank agrees to take the deed and forgives the balance of the mortgage.

Bankruptcy filing is another option, particularly if most of your assets go to your retirement plans. Once again, consult your lawyer because there are some things in bankruptcy that you get to keep but could vary from state to state. Making the right moves before filing for bankruptcy helps save you thousands of dollars. For instance, the tools you use for your business are normally protected; therefore, you do not want to sell them before filing for a bankruptcy. Always remember that there are institutions in your area you can go to for help and could advice you on possible solutions. The most important thing is to be optimistic about it and remember that for every problem, there is always a solution.

Learn more about Obama Mortgage Relief Plan Qualifications.