5. Loan Modification
- Loan Modification Programs: Some lenders offer loan modification programs to help borrowers who are underwater. This could involve reducing the interest rate, extending the loan term, or, in some cases, reducing the principal balance to make payments more affordable.
6. Impact on Credit
- Short Sale or Foreclosure: Both a short sale and a foreclosure can negatively impact your credit score. A short sale is generally less damaging than a foreclosure, but both can affect your ability to obtain future credit or loans.
- Strategic Default: Some homeowners choose to walk away from their mortgage (known as a strategic default) when deeply underwater. This is a serious decision with significant consequences, including foreclosure, legal action from the lender, and long-term credit damage.
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