Many people who purchased a home prior to the economic downturn may be in a situation currently where their home is now worth less than the mortgage is on it.  When a mortgage is higher than what a home is worth it is called negative equity.  Currently a lot of homes appraise for much less than what their homes used to be worth because of the recession leaving many people with mortgages that are higher than what their home is worth.

Negative equity can affect people in many different ways.  Some people may find themselves able to still pay their mortgage and may not be affected by the negative equity situation and may eventually be able to recover from the negative equity in the long run if the worth of their home goes up. Other people may find themselves unable to pay for their mortgage anymore and may want to either try to make their monthly mortgage payments more affordable or may want to sell their home so that they do not need to make such expensive mortgage payments anymore.

When a homeowner is left with a negative equity home loan and they are unable to pay their monthly mortgage payments there may seem like there is no way out and no options to recover from the damage that has been done.  They may also feel like there is no way around this problem and may seem like you are on the bottom of a huge mountain looking up at nothing but an impossible situation.  Luckily there are options for you if you are one of these homeowners.

If you cant afford to live in your home anymore you have a couple of options that you can consider before ending up in foreclosure:

• Loan Modification – A loan modification is when the bank agrees to modify the terms of the loan outside of the original terms of the contract.  In this option you will remain living in your home but will just have the terms of the mortgage changed to help reduce your monthly payments.
• Short Sale – A short sale is when the bank agrees to take a lower amount for the sale of your house than what the loan has left on it.  For example if you have a mortgage with $245,000 left but you can only sell your house for $220,000 the bank will decide if the amount is acceptable if so they will release you of your lien once the sale takes place.  The bank will be loosing $25,000 but they will still be making more off of the house than if the house went into foreclosure. This process starts off similar to a regular home sale where the homeowner puts the house up for sale and finds a buyer. Once a buyer is found and a contract of sale is signed certain paperwork has to be submitted to your bank so the bank can decide if the offer for the house is acceptable to them.  If so the short sale process will continue and the house will be sold at closing.

These two choices are the best way route to go if you are unable to make your montly payments anymore and have a negative equity home loan.

For more information on loan modifications or short sales in Staten Island or Brooklyn, New York or New Jersey call 718.979.4300 or 800.976.4904 to speak with a Staten Island real estate lawyer.