Ways To Get Out Of A Mortgage In Central Texas
Foreclosure Posted on November 18, 2019 Posted by Will
Did you know that the term "mortgage" is old French for "death pledge"! Once you sign on the dotted line, the deal is done in that it does NOT die until either the debt is fully paid back or when failing to make the payments (we don't advise doing that). Other words, even if you die it continues. Talk about a solid, long lasting commitment, right? It's like a freaking marriage (or at least how marriage is intended to be)! To sell a house and get out from under a mortgage in central Texas requires strategy, planning, and approval from the lender. Aside from selling your house for less than it is worth and paying your lender the difference (yuck), what are your options?
6 Options to Side Step a Mortgage
Strategic Default Or Ditching The Payment. Some underwater homeowners just cease making payments, move away, and snail-mail the keys back to the bank. This is about the worst thing you can do because it sends you directly into default, and ultimately, into foreclosure which is the atomic bomb of credit hits. A foreclosure on your credit report lasts 10-years; even worse, you often times cannot get basic credit cards or loans, rent apartments, or even some jobs. As you can easily infer - this is NOT the way to get out of a mortgage in central Texas.
Deed in Lieu. Deeding your property back to the lender in exchange for being forgiven the mortgage is called a deed in lieu of foreclosure transaction. In this scenario, the lender subsequently sells the property and recoups a portion of or the entire unpaid mortgage. Although completely possible, there are two problems with this option. First, banks are in the business of loaning money, not owning, managing, and having to sell property. Second, you likely need to have at least some semblance of a good relationship (especially a personal one with a history of on-time payment) with your bank/banker. Otherwise, they have no motive to offer this as an option to get out of a mortgage in central Texas and are better off letting the property go into foreclosure.
Foreclosure. When you cease to make payments, the bank will almost certainly file foreclosure on a homeowner, who is then forced to leave after a court judgment. The time it takes to go thru the foreclosure process is highly variable and depends on your county's regulations regarding the timing of various required notices. If the foreclosure goes uncontested, the the average time to foreclosure in Texas is approximately 60-days. This process may be delayed if the borrower contests the action in court, seeks delays and adjournments of sales, or files for bankruptcy. But we do not recommend this option...at all.
Short Sale. A homeowner may request of the bank that they accept less than what is currently owed on the home. If the bank obliges, it's known as a short sale and - bam - you get out of your central Texas mortgage. In this scenario the buyer of the property is a third party (i.e. not the original lender), and all proceeds from the sale go to the original lender. If the proceeds are enough to cover the remaining balance of the mortgage, you're scott-free! If it's not enough, the original lender could seek a deficiency judgement against the original mortgagee requiring him or her to pay the lender all or part of the difference between the sale price and the remaining value of the mortgage. Pros: Although still damaging to credit, it allows the mortgagee more control over the sale. Cons: It damages credit. The good news is that short sales are becoming more-and-more commonplace, as such, the stigma and credit hit of short sales may begin to slightly diminish.
Rent Out The House. Sometimes good people find themselves in bad situations. If this is you, one option could be to rent out your home and live elsewhere until you can once again afford the house. This option works great if you've owned the home for quite some time or for homes located in rapidly appreciating areas. The key to renting out your home is that the rent received should be at least 50% more than your mortgage payment. If it is at 40%, even better because you will probably then even make a little bit of cash each month. For example, if your mortgage payment is $500, you need rent to be $1,000 minimum. If your mortgage payment is $400, you have "struck gold"! The reason the 50% (or 40%) mortgage-to-rent ratio is so important is that, as a landlord, you will still have to pay for things like repairs and replacement of household items. Moreover, do not forget that the tax and insurance situations will also change to thereby become a little more costly. If considering this option to get out of your central Texas mortgage, before "diving in" be sure to check with your local insurance company and accountant.
Sell To A Company That Buys Houses. There are legitimate companies in business that buy homes to fix up and sell or hold for the long-term, like your local central Texas home buyers FixerUpper4Cash. This can be and probably is the fastest way to get out of your mortgage in central Texas. When selling to cash home buyers you typically sell the home for a reasonably discounted amount, but you do NOT pay any money out of pocket, including none of your money for closing costs (typically 3%). In addition, there is no realtor fees (typically 6%), no renovation costs (typically 3%), and no buyer repair amendments (typically 3%) that are normally associated with preparing a home for a traditional sale. Note: add up those percentages and you get a total of 15% that you are directly responsible for paying. On a $200k sale, that is $30k coming directly from your pocket! FixerUpper4Cash home buyers pay for all of this.
This option for getting out of your mortgage is definitely the fastest - it can be done in as little as 7-days (typical sale is 30-45 days) - allowing you to beat a foreclosure filing, resolve an estate, liquefy assets, and keep your hard earned dollars in your pocket.
Bottom line is this: when you have entered into the "death pledge" (i.e. a mortgage), you must settle with the bank in some way. Your goal should be to sell your house in the way that costs you the least in cash and time. If you could not afford your mortgage then or if you cannot afford your mortgage now, what would you do to get out from under your mortgage in central Texas?
