What should I do if I owe more than the worth of my house?

4Many homeowners borrow a heavy amount of loan in order to buy their homes. However, they might face difficulty when the prices of their houses fall. This will result in leaving the homeowner, who bought the house when the market was good, with mortgage debt more than the value of their home. When you owe more than the worth of your house, you can do the following things to save your home.

Contact Your Lender

The first thing you should do is to contact your lender and tell him about your situation. You should ask the lender for allowing a loan modification. If the lender accepts your request, he can reduces either your interest rates or your payments. Most of the lenders allow the borrowers to choose the loan modification option. Don’t panic in this situation and never stop making your payments. You can also hire a loan modification attorney in case you want some legal help.


Those homeowners who are unable to make payments can request the lenders for a deed-in-lieu. In the deed-in-lieu process, a homeowner gives the ownership of the house to the lender. The borrower is then released by the lender from the loan contract and any further liabilities. Deed-in-lieu causes less damage to your overall credit score than the foreclosure.

Short Sale

A homeowner can also go for a short sale in order to get out of this situation. In this process, the borrower is allowed by the lender to sell the property or house for a less amount than what the borrower owes on it.

Stay Put

There is a misconception among many homeowners that the price values of their houses will never go up. This misconception can cost them a lot, as the real estate market is cyclic. If the property values are not high right now, they will definitely go up in future. Also staying put costs you less than short selling and foreclosure.


Bankruptcy can halt the process of a foreclosure sale. In the meantime, your loan modification application can be considered by the lender. However, bankruptcy doesn’t solve the problem of the difference between the worth of the house and the debt.It will still provide you the required time in which you can have your loan modification application considered. If the lender accepts your modification application, you will repay on new terms according to your financial status.