One cannot log on the Internet or click the TV remote without hearing tales of homeowners being "underwater". Thankfully, such accounts do not involve Americans losing their homes to flooding. In the real estate world "underwater" simply means that the property is not worth what it would take to pay off the mortgage. So what's a homeowner to do?
1) Find out if you REALLY are underwater--Real Estate is a local game. A TV program filmed in Las Vegas does not reflect the local market in your neighborhood. Contact a local Realtor, or pay an appraiser (roughly 400 bucks) to find out what your home is worth. For most Americans fear of being underwater are unfounded.
2) Tread Water-- Just like they taught you at the Red Cross as a child. Sometimes the best thing to do is to keep doing what you are doing. House slightly underwater? Don't move for a few years. With a mortgage, time is on your side!
3) Refinance your loan-- Rates are at HISTORIC lows. A recent client just closed a 30 year loan for 4.3%! If you bought more than two years ago, odds are your mortgage is around 7 %. On a 150,000 dollar mortgage the savings would be almost 200 bucks a month.
4) Do Something Smart--Much of the housing crisis stemmed from people refinancing their homes and spending the money. Refi your home to a lower rate, AND KEEP PAYING THE CURRENT AMOUNT!! This will shave YEARS off your mortgage and cure your "underwater" problem.
5) Consider a Short Sale--Such action should not be taken lightly. Essentially, a short sell is when a seller gets the bank to take less for the home than what is owed. There are MANY strings attached so contact a Realtor to guide you through the process.
6) Take in a Renter-- Has your nest emptied? Put one of your spare bedrooms to work by hosting a renter. Obviously be selective with who you allow into your home, but the funds generated could help the bottom line. In any rental situation, have a well written lease even if the boarder is a personal friend.
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