In the United States, there were an estimated 11 million homeowners who owed more on their mortgages than their homes were worth as of June 30, 2010. During the so-called housing bubble, many people financed overpriced homes assuming, as has historically been the trend, that their homes would appreciate in value. With the recession and the housing slump, these homes are no longer valued for as much as the homeowners still owe on them leaving many people in a precarious position. Many of them are wondering if there’s any way to refinance in Madison, or anywhere else for that matter.The best way of dealing with an underwater mortgage is to continue making the payments until the housing market rebounds and home prices go up again. Unfortunately, this is not financially feasible for many people. With unemployment at its highest level since the Great Depression, too many homeowners are either unemployed or under-employed which means they just can’t afford those hefty mortgage payments any longer. These are honest, hard-working people who have always paid their bills on time, and now they’re faced with delinquencies in mortgage payments and no way to remedy the situation.The situation seems impossible, but there are still a couple of viable options. One choice is known as a strategic default. In this case, even if you can afford to pay your mortgage, you would choose to just walk away from your home and quit making payments. This is a practice that was almost unheard of until recently and is still something that homeowners are not willing to even consider. However, as they see their home values plummet and are feeling like they’re paying for a dead horse, many are having to reconsider it as a last ditch effort.The third option for “underwater” homeowners, which may or may not be a solution for them, is to talk with their lender about a Principal Reduction Alternative (PAR). This is the result of a plan set forth by the Federal Housing Administration back in March, 2010 and put into effect in September, 2010. Homeowners who are current on their mortgages and owe at least 15% more than what their home is worth can request a refinance under this program. If a lender chooses to grant this refinance, they must in turn forgive 10% of the original mortgage. It’s pretty much up to a lender who gets help and who doesn’t.Options aren’t great for those struggling with “underwater” mortgages, but there are some available, so all is not completely hopeless. Before you just walk away from your home and lose all the equity you’ve built up, shatter your credit score, and disqualify yourself from purchasing another home for at least 3 years, stop and talk with a lender and see if there’s anything else you can do. It’s always worth a try to attempt and negotiate a Madison refinance!
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