What is my best option regarding a mortgage that we can barely afford?
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What is my best option regarding a mortgage that we can barely afford?
We are current on our mortgage, and can probably continue to afford making our payments (just barely). However, continuing to make our payments makes it so I can’t afford to go back to school, and move forward with my life. We have attempted a short sale, but our bank has denied it because we still have good credit scores and are current on our payments. Our realtor is telling us that if let it foreclose, there is a good chance they will come after us for their losses (we have a re-financed mortgage, so I guess they have the ability to seek damages from us). I don’t know what my best option is?
Asked on August 3, 2011 Utah
Answers:
Robert S Payne / Robert S. Payne, Utah Bankruptcy Attorney
Answered 13 years ago | Contributor
If you end up facing a foreclosure, you may want to consider bankruptcy first.
In Utah, if the creditor forecloses on the property, they will be able to sue you for a deficiency judgment.
Bankruptcy is a drastic solution, but it may allow you to give up the home, face no deficiency judgment, and go back to school with tarnished credit but no remaining debt related to the home. Basically, bankruptcy will allow you to get back to zero and get on with your life.
FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney
Answered 13 years ago | Contributor
If you can continue making the home's monthly payments, are presently current on the mortgage and have good credit scores, refinancing the home for a lower interest rate and extending the length of the loan to thirty years would lower your monthly payments and allow for extra money for you to hopefully return to school.
The problem with a possible refinance is that the appraised amount may be less than what is owed on the home. If that happens you will not be able to refinance the loan unless you come up with additional monies to pay down the loan below the currently appraised value.
However, since you refinanced the home and its current loan is not the original loan when you bought it, losing it in a foreclosure could result in a deficiency judgment against you depending upon the laws of your state as to nonjudicial versus judicial foreclosures.
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