Selling your house on negative equity can be financially draining. Sometimes you may not even know you are in negative equity on your property. What should you do if you are looking to sell your home in Idaho with negative equity?
The dream of selling your home for a profit may seem distant. But you have some options that can get you out of the sticky situation. In this post, we look at the positive steps you can take to sell your house in Idaho with negative equity. We also shed light on how to avoid negative equity.
Learn everything about negative equity and get some ideas on selling a property with negative equity in Idaho. Let’s dive in.
What Is Negative Equity?
“Equity” refers to the percentage of the home you own after refinancing your mortgage. Negative equity is if the current value of your home is lower than the loan value when you bought it. If you bought your home for $100,000 in Idaho with a $90,000 mortgage, then you are in negative equity by $10,000.
Some underwriters use the term “underwater mortgage,” which is fancy parlance for saying you owe more on the house than its worth. You can calculate your negative equity yourself or have a mortgage lender do it for you. It is imperative to note that negative equity doesn’t affect you in the short term.
What Causes Negative Equity?
A home can be a sound investment. You expect it to appreciate as you give it facelifts, but this is not always the case. Sometimes the value can depreciate, or your mortgage value may increase, causing you to be in negative equity.
The following factors cause negative equity:
- Poor home condition: If you don’t maintain your home, it will lose value over time, putting you in negative equity.
- High-interest loans: High-risk borrowing due to low credit scores and high loan to value ratio means you will borrow high-interest loans. Most of your periodic payments will be to offset the interest rather than the principal.
- Marginal down payment: Your first-time deposit determines the amount of equity you’ll own. A small down payment means traditional lenders will milk you with their mortgage.
Market fluctuations in real estate value can also put your home in negative equity. A stagnant market can also cause negative amortization on house prices, which negates your equity.
The good thing is market fluctuations and real estate bubbles can decrease your negative equity. At the end of the fourth quarter of 2021, the number of properties on negative equity decreased by 30%.
Negative equity is only a hindrance when you want to sell your home. But we are here to help you sell your house even on negative equity.
Can You Sell a House With Negative Equity
Your house in negative equity is not the financial apocalypse. You can sell your house with negative equity. But there’s a catch.
Your lender will not allow you to sell the home unless you cover the negative equity cost. You will have to pay the $10,000 you owe in our example. Not all homeowners can afford this plus covering the closing costs. Some alternatives can enable you to sell your house on negative equity.
How To Sell a House With Negative Equity
By now, you can determine if your property is in negative equity. Your initial step should be to speak to your lender to determine if you can consolidate the mortgage into one loan or carry over the mortgage to your new property.
The following options are viable when you want to sell a house with negative equity:
House Short Sale
A short sale means accepting a lower price than the actual valuation of your house. As a homeowner, this is the step to take when pinned to the corner financially. A lender may accept a short sale over remortgaging. It is that harsh in the real estate market.
It does not mean you should accept prices way below the market value. There are creative ways to sell your house in Idaho on negative home equity. Cash home buyers in Idaho buy at higher prices than a short sale to a mortgage lender.
Foreclosing On Your House
Foreclosure hurts you more than a house short sale. Foreclosure means folding on your home and letting your bank sell it at more loss. Foreclosure damages your credit score, and you won’t get a remortgaging or mortgage option for seven years. Use foreclosure as the last option.
Paying the Remaining Balance
You can pay the $10,000 you owe to the lender out of your pocket or savings. But once you deplete your savings account, you do not have a financial cushion. Save some of your income and make biweekly payments instead of one monthly payment.
Note: Despite using your savings, leave some for emergencies. Do not trade in one problem for another.
Some lenders may penalize you for overpaying. You have to contact your lender about the payment policy. Paying your remaining balance is the surest way to sell a house with negative equity.
Deed in Lieu of Foreclosure
Foreclosure is not the best option. There’s some wiggle room for homeowners who have deeds. You can trade-in your deed and move out of the house. You will have some time to consolidate funds, which means you won’t be homeless in the short term.
Selling your house on negative equity can be a daunting task. You also have to cover closing costs that increase your financial burden. Alternatively, you can opt for homebuyers who pay cash to reduce the negative equity to sensible levels. Other benefits of selling a house for cash include buyers covering the listing and closing costs that you can’t fund on traditional lenders.
Can You Get Out of Negative Equity?
Getting out of negative equity is every homeowner’s dream. The good part is you can get out of negative equity. And you have many options. Here’s a brief rundown of how to get out of negative equity:
Advanced Payments
Your lender may allow for overpayment of your mortgage. Advance payments mean you pay an extra amount to offset your loan amount. Over time, you will reduce your mortgage and get to the break-even point, which is the stepping stone for getting out of negative equity.
Usually, paying in advance and overpaying your mortgage can attract penalties. You have to weigh whether the penalty amount is worth the extra payments.
House Improvements and Renovations
A facelift improves your house’s aesthetic value and financial value too. You can spruce up your home with custom windows and light fixtures to enhance its value. However, do not splurge more than you can afford.
It is best to have a designer help you establish the home renovations to increase your home’s value. Even the slightest of tweaks, such as new visors and vinyl siding installation, can improve your house’s value.
Visit houses in your area with a higher value than your own. You can borrow a leaf from the home improvements they employ to improve the property’s value. After making home improvements in Boise or Meridian, you can sell your home for an extra amount of money without incurring additional listing and closing costs.
An alternative to both options is to stay put. You can overpay your mortgage while not worrying about home repossession. The market trends in your Idaho area may favor the value of your house and appreciation. You will be in the green and can comfortably sell your house for a profit.
Refinancing for Your House
When you are in a financial rut, you can try numerous options. Some shove you further down, while others are the lifeline you need. Refinancing for your house presents the possibility of getting it right or wrong, depending on your financial discipline.
On average, refinancing a home costs an amount. There are different house refinancing options to pursue. You can choose to wrap your mortgage balance into another loan.
Another loan on another loan? This sounds counterintuitive, but it’s not. A soft personal loan or a lower interest rate loan in the short term can enable you to channel funds into financing the equity deficit. You can then pay back the loan with the cash generated from the sale of the house.
At least until you pay off the loan, you may have to downscale to an affordable home in your next purchase. A rookie move is to opt for a higher mortgage. You will pay through the nose to finance both loans, which beats the logic of refinancing your house in the first place.
Refinancing means you have to cover closing costs. However, some reputable sellers in Idaho can cover the closing costs. As a homeowner, the onus is on you to shop around for the best deals.
Final Words
Market changes mean you may fluctuate between negative and positive equity at times. However, you have options to sell your house on negative equity value. With the market changes come increased offerings on selling your home at negative equity. We advocate for keeping your financial health on the up and up.
When looking to sell your home on negative equity, contact cash buyers who cover real estate agent fees and closing costs.
Facing the question of who will buy my house in Meridian can be daunting. Gem State Cash Offer takes the uncertainty out of selling your home in Idaho with negative equity. We buy homes in Boise as well. You can get an evaluation of your home in a day and find the best deals for selling your home.
Contact Gem State Cash Offer at (208) 999-339 to set up your no-obligation consultation on selling your house in Idaho with negative equity.