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Mortgage underwater? Here's some tips to help

When you owe more on your mortgage than your home is worth, it's called being underwater. This problem has affected many Americans since the recession and continues to affect people all over the United States. According to Zillow, of those who purchased homes in the last five years, 29 percent owe more on those homes than the homes are worth.

This discrepancy is also known as having negative equity. Once you make a payment, you're essentially losing that money, since you won't see it returned if you sell the house. With any home purchase, the goal is to eventually sell the home for what you paid or more.

What are the options if you find yourself in this situation and are trying to sell your home? The first is to reduce how much you're asking for your home. You need to sell for what the home is worth, and you have the ability to ask for more. You want to find a price point that allows you to break even at the very least, but if you're unable to do that, you'll need to make up the difference when you pay back the mortgage company.

The next option would be to purchase your next property and then to rent the old one. This could be a good solution if the home's mortgage is inexpensive, since the rent could cover the mortgage and other expenses related to the home. This essentially pays the home off for you, but only if you have a renter willing to pay enough.

Finally, you have the option of a short sale. Selling the home for less than it's worth with an agreement with the bank or mortgage lender that you won't have to pay the difference is a good choice for some. It does leave a negative mark on your credit, which is something to discuss with your attorney and accountant.

Source: Bankrate, "What if you're upside down in your home?," Barbara Mlotek Whelehan, accessed Dec. 13, 2016

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