When Foreclosure Threatens: Can You Afford to Keep Your Home? Part 2 — NMBankruptcyBlog.com

2913905_blogForeclosure rates are as alarming as unemployment rates. Deciding what to do if your home is threatened in this way is a severe test of maturity. We don’t want to lose what is usually both our biggest financial investment and, truly, our safety and refuge.

One of my favorite legal self-help publishers has an article I’m running in a series on, Monday  2/15, 2/22, 3/1, 3/8, 3/15, 3/22,/ 3/29, 4/5, 4/12, 4/19, 4/26, and 5/3.

Deciding Whether to Try to Stay or Go

If you have some equity in your house, it’s probably worth it to try to hang on to your house, if you think you can afford future monthly mortgage payments (see “Are Your Monthly Payments Too High?,” below, for more on this). If you can’t afford the payments, see if you can reduce your debt load so that you can make them (see “Can You Reduce Your Debt Load?,” below, for ideas on how to free up more of your income or change the payments themselves).

If you find yourself significantly upside down (negative) when it comes to equity, and you are behind on your mortgage payments, there’s not much point, from an economic perspective, in trying to keep the house. What is significantly upside down? It probably makes sense to give up your house if its current value is 25% less than what you paid for it. That’s because your house’s value would have to appreciate by as much as it dropped for you to come out even, and that will likely take several years.

However, if you are upside down on your home and still want to keep it, you might be able to reduce your mortgage payments by working something out with your lender or taking advantage of a favorable refinanced loan under the HOPE for Homeowners Act of 2008. (See, “Can You Reduce Your Debt Load?” below, for more on this.)

Reprinted with permission from the publisher, Nolo, Copyright 2009, NoloWh

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