These days many Florida homeowners own homes with mortgages that are underwater, meaning that they owe more on their mortgage than the home is worth. And while this is tough for any homeowner, many couples who are underwater and facing divorce, are also wondering what their options are. It turns out, they are much the same as many others also facing mortgage problems.
One possible option would be to seek a mortgage modification. This would make it possible to lower the interest rate, change the rate from adjustable to fixed, extend the repayment term of the loan and possibly even reduce the principal amount owed on a loan. All of these possibilities could help to reduce monthly mortgage payments and make the home more affordable.
Another option would be to refinance the terms of the loan under the person’s name who will be keeping the home after the divorce. By refinancing in the name of the divorcing party who is keeping the home, it will be possible to protect the home from foreclosure, while eliminating the financial liability of one of the divorcing parties.
Outside of mortgage modifications and refinancing, other options include a short sale or even just letting the home go to foreclosure. Of course there are some considerations to make before deciding to get rid of a home, but in some situations where more is owed than what the home is worth, for a couple that is divorcing, it may just be financially the best thing.
Overall, going through a divorce and owing on a property that needs to somehow be divided in a settlement can be a very stressful time. And as just mentioned, there are a number of different options to dealing with an underwater mortgage, which for some can seem daunting. However, even though banks can be hard to work with, and the processes themselves somewhat confusing, a legal professional can at the very least explain all options available, and help to walk you through the process.
Source: NASDAQ, “Underwater Mortgages and Divorce,” Kara Johnson, Nov. 11, 2011