how to get out of a mortgage

How to Get out of a Mortgage You Can No Longer Afford

Financial experts around the nation are predicting a recession in 2020. Many people are concentrating on how this will affect the next presidential election, but we should be looking at how it could affect our own lives.

The last time the US had a recession, it caused the subprime mortgage crisis. At its peak in 2010, 120,000 homes entered into foreclosure in a one-month period.

While foreclosure isn’t ideal, many people believe it’s their only option. But what do you do when your mortgage has become too big a burden to handle anymore? Keep reading to learn how much of a mortgage is too much and how to get out of a mortgage you can’t afford anymore.

What Does House Poor Mean?

Before we talk about getting out of your mortgage, you need to know how much is too much when it comes to mortgage payments.

Experts recommend that you spend no more than 25% of your total income on your mortgage payment. This amount should include your PMI, property taxes, and homeowners’ insurance.

You can use this calculator to find out how much your family should be spending on your home.

Wo what happens if your mortgage comes out to more than 25%? This means that you’re house poor, or paying for a more expensive home than you can afford.

But it’s better to realize this now before the recession hits and your finances become even more unstable.

Ways to Get out of a Mortgage

Listed below are the four main ways to get out of a mortgage that’s making you house poor. Your specific situation will determine which one is right for you.

Sell Your Home Traditionally

The most common way to get out of a mortgage is by selling your home traditionally on the housing market.

The main issue with selling traditionally is that it takes time.

In 2018, the average home sat on the market for 68 days. But in 2010 during the mortgage crisis, that average time rose to 140 days. So with an impending recession, don’t expect your home to sell quickly.

If you can’t afford your mortgage currently, could you afford the extra four months of payments. Those four mortgage payments could affect your whole family negatively.

While you’ll likely get the highest selling price with selling your home traditionally, it does take money.

Here are just a few of the costs associated with selling a home traditionally:

  • Realtor commissions of up to 10% of the sale price
  • Home improvement costs to get the house ready to sell
  • Pre-sale home inspection

If you’re able to sell your home, make sure your next home is truly affordable. You don’t want to go through all the trouble of selling your home to save only $20 a month. Buy a home that works with your budget and makes your family financially secure.

Refinance Your Mortage

There are some circumstances where refinancing could make your mortgage affordable again.

Consider refinancing if you have a decent amount of equity built into the mortgage. Or, if you purchased your home when interest rates were high and you could secure a much lower interest rate.

By refinancing, you are replacing your existing loan with a whole new loan.

So, if you’ve built in enough equity, you may no longer have to pay PMI on your loan, saving you a decent amount of your monthly payment. Or, if you lower your interest rate, your monthly interest payments would be lower, also leading to a lower monthly payment.

But, be aware that this also restarts the amortization process of the loan. So if you’ve been paying on your mortgage for five years already, with a newly refinanced 30-year loan, you’ll end up with a mortgage payment for 35 years.

Sell to an Investment Company

If you need to get out of your mortgage as soon as possible, look into selling to an investment company. These businesses work by offering you cash for your home within a matter of days.

This process is pretty simple, you start by contacting a home investment company in your area. Then, you’ll set up a home visit where you review the details and they conduct an appraisal.

After that, they will provide a no-obligation cash offer and most homes close within 30 days. By choosing this route, you avoid any closing fees, hidden costs, and contingencies.

The biggest drawback to selling to an investment company is that you’ll likely make less than selling your home traditionally. But if the cash offer is enough to cover your mortgage and get your out of your high monthly payments, this option could be the perfect solution for you.

Foreclose on the Home

And if you choose to take none of these steps, a mortgage you can’t afford will quickly turn into a foreclosure.

A foreclosure happens when you stop making your monthly mortgage payments. The bank then revokes their mortgage and takes back the home, which they can then sell at auction to recoup some of their losses.

Along with losing your home and any equity you had, there are other drawbacks. A foreclosure will appear on your credit history, meaning it will be harder to receive a mortgage or any other loans from lenders in the future.

Because of these reasons, many people take drastic steps to avoid foreclosure. If you care about your financial future, there are other ways to get out of your mortgage.

The Easiest Way How to Get out of a Mortgage

No one wants to leave give up on their home, but if you can longer afford your mortgage payments, there may be no other option. If you’re wondering how to get out of a mortgage look for the easiest and quickest solution — selling to an investment company.

nvestorXchg is a Long Island investment group willing to help you make the most out of this unfortunate situation.

Contact us today to schedule a home visit with our team. You’re only a phone call away from no longer being house poor!

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