Should You Keep or Surrender an Underwater Home?
December 24, 2014
A Knowledgeable Michigan Bankruptcy Lawyer Can Clarify Your Options
Before the recent economic downturn, who could foresee a dramatic reduction in home values? For many families, home ownership represents personal security. However, home ownership also represents an investment in assets that, until recently, appreciated year after year.
When a home is no longer at or near its value at the date of purchase, homeowners now have to decide whether it still makes sense to keep making the payments. An experienced bankruptcy attorney looks at each family’s unique set of circumstances to help unravel the details and reveal the most appropriate course of action.
Common Reasons to Surrender a Home
Sometimes, the reasons for relinquishing your home are relatively obvious, such as if you can answer “no” to any of the following questions:
- Can you afford to keep up with payments? If not, the decision may be out of your hands. Some lenders try to work with you to bring your payments current, they cannot wait too long. Eventually they may decide to foreclose on the home.
- Do you really want to keep the home? You may have personal or other reasons to remain in your home over the long-term. Perhaps it was the house where you raised your children. On the other hand, if it was just a starter home purchase, it may be time to move on.
- Does it make financial sense to keep the home? When the mortgage amount you still have to pay exceeds the home’s value, it is often referred to as underwater or upside-down. These decisions can be the most-difficult ones to make because they often require you to accurately predict the future value of your home.
Special Considerations of Underwater Homes
In the case of an underwater home, you need a really accurate crystal ball to decide if it is time to let go. According to Zillow.com, Michigan home prices increased 2.5 percent between October, 2013 and October, 2014.They also predict an additional 3.3 percent rise over the next year.
Do these predictions really make sense for your specific circumstances? A bankruptcy lawyer would help you look beyond a single encouraging number. Assuming these price increases really apply to your regional area, you still need to determine your chances of gaining back the full value within a reasonable time period. Unless you plan to stay in the home and repay the mortgage over 25 or more years, you may never recover its value. You may feel like a homeowner, but from a financial standpoint, you are really still renting.
A Fresh Start Can Provide a Fresh Opportunity to Own a Home in the Future
At the Law Office of Jeffrey J. Randa, we carefully look at your current financial circumstances before making the recommendations that make sense for you. We want our clients to realize all their dreams — including owning an affordable home. We know that starting with a clean slate may be the best way for many people to get there. The right first step is to schedule a free initial consultation. Call us at 586-228-6523, or use our convenient contact form to learn how we can help.