Since there are so many people unemployed in this bad economic time, a lot of homeowners find that they are unable to keep paying their regular mortgage payments. Some people have low rates but still, without employment, they still cannot keep up. 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 homes so they have to sell and move on. However, with falling home prices, they also find themselves with upside down mortgages. That means, they owe the mortgage companies more than their homes are worth. So, what can they do?

Is Selling an Option?

The first thing that comes to mind for many homeowners is to sell and move on. However, if they were to sell their homes, they will get less for them than what they owe the banks. So, selling might not be the most logical choice. However, it is always a good idea to talk to a Realtor to make absolutely certain that there is no 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.

Should Homeowners Refinance?

Usually when you owe more than your home is worth, mortgage companies are not likely to lend. But, there may be options that allow you to refinance your home or modify your loan especially when the rates are very low right now. If you have good credit and want to explore the option of refinancing or have any home loan questions, call your lender as well as other lenders for comparison. Sometimes, your own mortgage company cannot help you but other banks may be able to.

The Result of Foreclosure

Lots of homeowners cannot sell their homes, cannot refinance and cannot modify their loans. Soon their mortgage companies start to foreclose. Foreclosure severely hurt your credit so you need to call your bank and try to negotiate with them before they foreclose. If they do go ahead with foreclosure, however, there is the new 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.