We all go through difficult financial situations at different times in our lives and it can be stressful. Many people feel embarrassed and unwilling to ask for help. It’s normal to have questions about the financial agreements you have in place when you’re going through this, and ask about ways you can alleviate some of the stress that comes from bills including your mortgage. There are plenty of options available to you but it’s important to understand the pros and cons of walking away from your mortgage, and learning how it can be done without ruining your credit.
Can You Get out of a Mortgage Without Ruining Your Credit?
Yes, it is possible to walk away from a mortgage and there are options available you should be aware of and explore. If you are underwater on your mortgage, you owe more on your mortgage than the total amount your house is worth. You might be in a financially challenging time and unable to keep up with your mortgage payments, or maybe you’re moving, and because of the condition your house is in, it’s not selling fast enough.
A strategic default might seem like the solution for you, where you choose to walk away from your mortgage. Unfortunately, this can negatively affect your credit score and the results of this can take years to escape from.
Luckily there are options for you to walk away from your mortgage without causing severe damage to your credit score.
Loan Modification
Lenders generally want to avoid foreclosure due to the lengthy and costly process and to avoid this, they will likely discuss alternative options with you. One of the options that may be available is a loan modification. With this option, the lender will modify the loan by lowering the payment amount, extending the term, reducing the interest rate, and maybe even forgiving the principal.
A reduction in monthly payments can help ease the burden you may be feeling, and both you and the lender can come to a mutually beneficial solution. It can be a great option but be mindful of the fact that the lender doesn’t have to approve the loan modification, and if that’s the case you’ll then need to consider other options.
Short Sale
One way to get out of an underwater home is a short sale. This is when the homeowner sells the home for less than the loan balance. The lender accepts whatever they can as payment for the loan and forgives the difference.
A short sale can help you avoid the lengthy and costly foreclosure process, allowing you to walk away from your mortgage without doing too much damage to your credit score.
However, the lender can choose to reject a short sale and instead get a deficiency judgment against you, forcing you to pay them back the total outstanding balance owed on the mortgage.
If the lender does file a deficiency judgment against you, it will appear on your credit report and negatively impact it. So while this option can be a great solution, it can be riskier as well.
Deed in Lieu of Foreclosure
Your next best option could be a deed in lieu of foreclosure. For this you will work to reach an agreement with your lender to sign the deed over in exchange for whatever amount remaining on your mortgage gets forgiven, with no further obligations.
This option is best to consider after you’ve tried a short sale or loan modification and you want to avoid foreclosure.
Signing the deed to your house over to the lender can still negatively impact your credit rating and can take years before you can get another mortgage.
Foreclosure
If you completely default on your home payment, a foreclosure will occur. The lender will seize your property and start the foreclosure process to recover whatever amount you still owe them by selling your home to a new owner.
Foreclosure affects your credit rating severely negatively. A foreclosure stays on your credit report for seven years and prevents you from finding employment, applying for credit years later, and you can expect high interest rates if you can get a loan or line of credit.
It’s a better option to contact your lender to come to an agreement with them and stop foreclosure, or you can sell your house.
How You Can Walk Away From a Mortgage Without Ruining Your Credit
The best way to avoid walking away from your mortgage without ruining your credit is by considering selling your home. If you’ve already tried this option and still couldn’t get it sold for other reasons, you still have options.
We can buy your home fast with an all-cash offer, no matter what condition your home is in. You’ll get your money quickly, and you can have peace of mind that you don’t carry the weight of your mortgage on your shoulders.
The best part is, your credit score doesn’t get affected, allowing you the chance to buy a new home or apply for a car loan or credit card in the future.
To avoid the repercussions of the options mentioned, contact us to get a no-obligation cash offer quote. There are zero fees and zero commissions involved!
Our buying process is quick and easy, so let us buy your home for cash and save your credit score! We pay cash and move quickly, so we won’t waste your time.
If you would like to discuss your situation further or need a free no-obligation cash offer, call us today at 781-309-7085!
Additional Resources:
- National Foundation for Credit Counseling (NFCC): Offers free credit counseling and resources for homeowners facing foreclosure.
- U.S. Department of Housing and Urban Development (HUD): Provides resources on foreclosure prevention and connects you with HUD-approved housing counselors.
- Federal Housing Administration (FHA): Offers loan modification programs for homeowners facing hardship.