Five Ways to Rescue Your Underwater Townhome

The question makes my heart *sigh* each time I hear it.  “What should I do with my Burnsville underwater townhome?” “How can I sell my Apple Valley townhome if it’s underwater?” “I can’t sell my Lakeville townhome, but I need to move?” “When will my Farmington townhome be worth more than I owe on it?” “Should I short sale my Eagan townhome?” “What happens if I let my Rosemount townhome go into foreclosure?”

Each person’s situation is slightly different and the decisions you make about your underwater property can have long lasting implications for your future.  I am happy to talk to you personally to help you analyze the details of your decisions.

The 5 options detailed below are the most common solutions I see homeowners selecting.  Some of the ideas may sound scary first, but read through the explanations and give us a call to discuss them if you wish.

1) Stay and live in the townhome. If you do not have to move for a specific reason such as job transfer and the current payments are still affordable, the first option is just to stay put. This can be difficult if you have your heart set on getting a home with more space, a backyard, basement, larger garage, etc. If your family size has increased since you purchased the townhome this option can be especially unattractive. Look for opportunities to better utilize the space. Can you convert the loft into a bedroom? Give the kids the larger bedroom? Get bunk beds, futons, closet organizers or other practical space-saving furniture? Build in shelves all along the garage? Think about all the options before deciding if moving is absolutely necessary, especially if your mortgage balance is not that far over the townhome’s value. The market may improve enough in a few short years to allow you to comfortably sell the property.

2) Refinance the townhome using one of the new programs. There are several new mortgage programs designed to allow refinance even if the value of the property is not as high as the mortgage balance.  Read the blog post, Can I Refinance my Underwater Mortgage for more information about this option.  New programs are being introduced this next month, check back here as I will write an update post about new refinance options starting in March.

3) Rent the townhome and buy a new house. We can refer you to a great mortgage officer, see if you can qualify for a loan to buy your new home while still owning the townhome. There are some very practical steps and financial considerations you should consider before doing this option. Consider things such as; “Can I pay the payments on both properties if my renter moves out unexpectedly?”  “Can I keep up on the maintanence and repairs of two properties?” “Do I want to deal with the work of being a landlord?”  Don’t worry about the work of being a landlord, Laura Kvas, an agent with Selling South of the River, can handle all your rental needs.  She does a fantastic job, read about her helpful rental program on our Rental page.

4) Short sale the townhome and rent for three years.  If the townhome is hugely underwater this might be a wise option. If the balance on your mortgage is $80-$100K over the current value of the townhome, it’s time to think about the long term picture. I see so many young families still in a property on which they owe $100,000 more than the current value. Looking at the long term picture means to ask yourself: “If we stay and keep the property, paying on it for 9 more years, will we still be $20K underwater?  How long can you truly live in the townhome?  “What other aspects of your financial future will be effected by this decision such as retirement savings? Kids’ college expenses?”

5) Foreclosure. If there is no significant hardship to warrant a short sale, the last option might be going through a foreclosure. I am not suggesting you decide on foreclosure, short sale, rental, refinance or staying in your townhome, because I do not know your specific situation. I am suggesting that it’s very smart and necessary to become familiar with all the options and to evaluate each one based on your current and future financial interests. Remember, many people can get a new mortgage just three years after a short sale or a foreclosure. For more information on that, read Where Will Homebuyers in Dakota County Come From Next?

We are here for you, call anytime 612-889-6496, I’ll be happy to confidentially discuss your situation. Remember …

“The absence of making a decision … is, in and of itself, a decision about your future.”