What is an upside down mortgage?
An upside-down mortgage is simply a mortgage in which is more money is owing than what the property is worth. An upside down mortgage can happen to anyone. With real estate markets in big cities like Toronto and Vancouver where house values are decreasing, many homeowners will find themselves in this position today.
If you find yourself in this situation and can afford your monthly mortgage payments, the best thing to do is stay put and keep paying down your mortgage until you have built some equity.
Can You Sell Your Home With an Upside Down Mortgage?
You may want to or need to your home in a downward market, knowing next year, your home will be worth less. The answer is yes you can, but will need to take into consideration the ability to pay the debt you acquired between closing costs, mortgage penalties and mortgage payouts. If you are able to find the funds, sometimes it's just best to take the loss and move on to avoid going further into an upside down mortgage.
If you are struggling to make payments and your mortgage is upside down, talk with your bank. Your financial institution can allow you to sell your home and provide you with a personal loan to cover the shortfall, saving your credit.
The simplest solution for homeowners with upside-down mortgages is to continue making payments, if possible, and wait for home prices to rise again before selling their homes.
Are there any other options?
Sometime you will see an owner selling half of a house (yes it is possible). This is usually due to a civil enforcement and a lack of equity in the property. If you choose to keep your home and are will to sell half to a stranger, this may also be an option for you.