sell your house
If you are wondering how to get out of a mortgage, there is one important thing for you to know. The fastest way to get out of your mortgage is to sell your home. If you do this you can then use the proceeds of the sale in order to pay off the existing balance of the mortgage. Depending on how your local real estate market is performing, getting your house ready, listed with a Realtor and getting an offer can happen in a matter of days, weeks or sometimes months. It all depends on how active the local market is and what property type you own. Some property types like single family homes will sell faster than other property types like multi unit buildings. It’s all relative to your local market and the current market dynamics.
If you are trying to figure out how to get out of a mortgage, selling your home is the best option. However, it is important to note that sometimes home owners will have non-standard mortgages with unusual terms. You want to watch out for large penalties when you pay off your mortgage.
If you are trying to figure out how to get out of a mortgage, there is another option. You can turn over ownership to the lender. The only reason you would really do this is if you are in financial trouble and you are trying to avoid foreclosure.
TURN OVER OWNERSHIP TO LENDER
This unfortunate arrangement is called a deed in lieu of foreclosure. It requires the seller to get their lender to take back the deed to their home in exchange for releasing them from the mortgage. With this arrangement, you are going to have to provide evidence to your lender that you are not able to afford your payments.
A deed in lieu does not require the seller to prepare and list the property for sale. It will definitely damage your credit rating, but it is not as bad as a foreclosure to be honest.
The catch here, and it is a huge catch is that the lender does not have to accept the deed in lieu offer. If a lender wants to, they can try to make back their money through a regular foreclosure. Another pretty big catch is that if the lender sells the home for less than the mortgage amount, you will likely have to make up the difference. Ouch! So you have to ask yourself, is this the best way on how to get out of a mortgage?
LET THE LENDER SEEK FOReCLOSURE
If you are thinking “how to get out of a mortgage” try this…
It’s pretty simple, as it requires no initiative by the homeowner. The homeowner just needs to stop paying and eventually they will get foreclosed on. Sounds simple, right? Well it is.
Just remember that foreclosing on a home will significantly damage your credit. It will also make buying another home very difficult. Also, please don’t forget you will need to find another place to live, and that can be a lot of work. For example, if you chose to rent, what is the market rent in your area, and how much inventory is available? These are important questions to ask yourself before you start down this path.
The legal process of foreclosure can take several months. It could be years before you actually have to move out. During this long period of time, you may be able to come to an agreement with your lender in order to stop foreclosure and stay in your home. Overall, this is a stressful situation.
ASK FOR A SHORT SALE
This can only work if the home is worth less than the loan balance. With this method, the seller gets the lender to agree to have the home sold for less than the mortgage balance. The lender then accepts the proceeds and pays the mortgage.
Again, the lender does not have to agree to the short sale if they don’t want to, and in some states the lender can sue you for the shortfall. Another major drawback is that you’ll have to go through the process of listing and selling your home, as well as moving out when the deal is finalized. Again, a pretty stressful situation, if you ask us!
RENT OUT YOUR HOME
If a homeowner is able to rent out their home for more than what their monthly payments are, this is a win. It is not getting rid of your mortgage, rather it is getting rid of your mortgage payments in a way.
If your local rental market is strong and there is a lot of demand, then this can be a good idea. One of the best things here is it allows you to remain a homeowner, and you can ultimately have a tenant who is paying down your mortgage over the long term. Thus building your equity and net worth.
On the downside, if you rent out your place you are going to have to find another home to live in. Not to mention, what happens if you get a bad tenant who stops paying the rent? Then you are in double trouble. You have a tenant that you need to get rid of and you have no rental income coming in to pay for your mortgage. Ouch!
JUST WALK AWAY
If you are trying to figure out ‘how to get out of a mortgage‘, you can just walk away….
This was done by many homeowners during the last recession. People were stuck with homes that they could not sell for what they owed on them. They could not rent them out to cover their monthly payments, and they could not convince their lenders to give them a break, so they just walked away from them.
We are not a fan of the ‘just walk away’ method, but sometimes you have to do what is best for you.
Remember to communicate. Tell your lender what you are planning on doing. The lender may work with you on a solution. You could be pleasantly surprised by the lender’s willingness to work with you to find a solution.
If you are trying to figure out how to get out of a mortgage, some argue that this is the most straightforward way – just walking away.