New Jersey Divorce Lawyers Blog
Since the 2008 mortgage crisis New Jersey home values have taken a substantial hit, losing approximately one-third of their value in some communities. Over the past couple of years values have been on the rebound. However, the pace has been very slow.
If you’re going through a divorce, your home has negative equity, you are behind in mortgage payments, and a foreclosure is on the horizon what are your options for the house, and what is your smartest move?
If You Want To Keep The House
If you want to keep the house one option is to seek a loan modification from your bank. In this scenario you will ask your lender to take the total amount of the late mortgage payment balance and roll it into your loan – basically extending the term of your loan. This may allow you to hold onto your house and wait for its value to rise over time. Another option, if the circumstances make financial sense and your spouse is on the loan with you is to attempt to assume the loan in your sole name. A third option which involves you keeping the house is to refinance the property to remove your spouse, roll the overdue mortgage payments into the refinance, and hopefully lower your interest rate and payments. Each of the above scenarios involve you carrying potentially heavy debt. As I stated in my previous blog post entitled Right To Stay in The House After Divorce In New Jersey( hyperlink) there are a number of questions that you should ask yourself to determine whether it makes financial sense to remain in your home (whether it has positive or negative equity). If, after answering the questions you decide that it makes financial sense to stay in your home, you can pursue a loan modification, a loan assumption (if your bank offers this option), or a refinance.
If You Decide To Leave The House
If you decide that you will be leaving the house, you have a few options on how to leave. You can opt for a short sale or you may attempt to transfer the house back to the bank in a process called a deed-in-lieu of foreclosure. Alternatively, if the bank is not receptive to a deed-in-lieu or foreclosure or a short sale, you may have no choice but to let the house go into foreclosure. Continue reading →