My New Blog

If you're just thinking of letting your home or investment property go because of rising mortgage payments, think again. There are 3 scenarios to consider.

The first and most popular, yet most self-destructive is not to make any more mortgage payments and wait a few months until the lender takes the house in a foreclosure. Result is that you'll have lived free of payments for 3-5 months and you're rid of the burden of paying for a house that's "just not worth it". Downside is that your credit report will display in great, BOLD letters the dreaded "F" word of the financial world. "FORECLOSURE" and if you have a first and second mortgage , it will appear twice! For 7 years!

The second choice is to call the lender and tell them that you want one of those "Short Sales", since you've heard so many people with very good credit opting for this choice. The lender will tell you that they will only consider a "Short Sale" if you are a)truely destitude, b)have missed the last 3-4 payments on the property and c)have listed the house on MLS for a reasonable price for some time, yet were unable to sell. A Short Sale is time consuming and will ruin your credit just the same having reported "120+ day Lates" on your mortgage history. On top of that, your friendly IRS will impose a "Gift Tax" on the reduction of money owed to the lender, that will be payable "as sure as death".

If you have the income and/or the credit history sufficient for a lender to even consider "RE-FINANCE" then do it, do it now. In most of the country, real estate prices have not yet reached bottom, some markets like SW Florida and Southern California are historically ahead of the curve. They are the trend leaders, not setters. Either way you'll want to take advantage of current low interest rates if you want to refinance. Even if your house has no equity, if you have savings or other means to infuse equity into your property, do it. The reward can be a fixed rate mortgage with payment options. Yes options, allowing you to survive this period of financial terror and come out on the other end with an unscarred credit report.

Consider having to live with the "F" word for everyone to see, future landlords, future employers, car rentals agents, credit card bullies! They all will charge you double and triple the norm and most of the time, they'll just refuse you.