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What options do I have for an underwater mortgage?

An underwater mortgage is something that no homeowner wants to deal with. The harsh reality is that getting out from under an underwater mortgage can be rather difficult, but it isn't necessarily impossible. There are some options available for people who want to refinance a mortgage that is underwater.

Can I get a traditional mortgage refinance?

It is incredibly difficult to get a traditional mortgage refinance when your mortgage is underwater. Generally, mortgage companies require that you have at least 20 percent equity in your home in order to qualify for a refinance. With that in mind, a traditional refinance might not work for a home with an underwater mortgage facing foreclosure.

What options do I have?

The options you may have available depend largely on your situation. If you can demonstrate financial hardship, you might qualify for a Home Affordable Modification Program option. This differs from the Home Affordable Refinance Program in several ways. The HAMP allows you to have missed payments, but the HARP doesn't allow you to have any missed payments in the last 12 months. HARP is a refinance program, but HAMP is a change to the contract terms.

Are there any other options?

You might be able to qualify for other options through the lender. In some cases, filing for bankruptcy might help you to free up money that can be used to pay your mortgage. In some cases, you might be able to include the mortgage in the Chapter 13 bankruptcy filing as long as the arrearage is paid during the bankruptcy.

It is important to carefully review how each option will affect your home. Understanding all the differences and choosing the option that fits your needs can get you started on the path to financial freedom.

Source: Bankrate, "Refinance options when you're underwater," Marcia Passos Duffy, accessed Aug. 14, 2015

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Joshua Z. Goldblum, Attorney at Law
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