I am upside down on a house that I am renting right now for less than the actual mortgage. What are my options?

Asked by Julie Graham, Baltimore, MD Thu May 26, 2011

I am upside down on a house that I am renting right now. I have tried refinancing and loan modification but apparently I am not eligible (no hardship and stable job). My boyfriend and I are trying to buy a house but he also owns his as well and has his mortgage to pay. His house has equity in it, which is why we want to keep it as rental property. Mine doesn't. The renters payment is not even covering my monthly mortgage. What can we do? I'd like to make my mortgage go away or reduce it to a reasonable amount.

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Marney Kirk, Agent, Towson, MD
Thu May 26, 2011
Hi Julie, it sounds like you are in a very tough position, and I am sorry to hear it! Unfortunately if you were to short sale your house, the likelihood is that you would not be able to buy a new one for two years, according to most banks rules.
When is the lease up? If it is soon, would it be possible to raise the rent for a new tenant to cover your mortgage payment?
I wish you much luck! Please let me know if there is anyway I can help you further.
Marney Kirk
Keller Williams Excellence Realty
Web Reference:  http://www.realtormarney.com
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Brian, , Washington, DC
Thu May 26, 2011
Our focus is on short sales in this market, because so many people are in exactly your position, and the short sale is the best option for them. As it turns out, as long as you stay current, it should not have a negative impact on your credit as a legal matter (although sometimes creditors mess this up, requiring post settlement clean up), since the creditor should under the FCRA report it as paid as agreed if they waive the deficiency, and many lenders will allow you to buy another house in as little as 6 months (Fannie Mae's standard is three years, but not every lender sells their loans to them). Feel free to give me a call for a free consultation.

Brian Gormley
Web Reference:  http://capitolshortsale.com
0 votes
David Burnham, , Washington, DC
Thu May 26, 2011
It sounds like it is a bad situation, but you are at least getting by for the time being. I would not recommend a short sale because it will hurt your credit for 7 years and you will not be able to buy a home for at least 2.

Depending on how far you are upside down, I would continue renting for a year or two and then. Hopefully you will be able to sell and pay off your mortgage. Alternatively, you can look at selling your home and bringing money to the table to pay your shortage. Maybe the proceeds from your boyfriend's home will be able to pay off the remainder of your loan, then you can move on and buy a new house without the burden of the others.

Neither option might sound great, but it is not a good situation anyway you look at it.
0 votes
Robert Mcgee, Agent, Baltimore, MD
Thu May 26, 2011
Are you loosing money on an after tax basis, that is after deducting, taxes, insurance, interest, mortgage insurance, hoa fees and 3.3% annual depreciation? Probably not. In that case, wait out the market and raise the rent at every opportunity. You should know that the rental market is the tightest it has been in years and rents keep rising. We get 5-10 inquiries for every property we list. You may be below market and not even know it. See my blog ar http://www.baltimorerealty.blogspot.com. I have written several posts on rising rents.

Bob McGee
Advance Realty Timonium
(410) 560-4574
0 votes
June Piper-B…, Agent, Baltimore, MD
Thu May 26, 2011
Julie, you have several options available to you, but I have some questions first. Has the rent ever covered the mortgage? Can you increase the rent that the tenant is paying?
Some options available to you are contacting your mortgage company and explain your hardship to them and see if they will let you do a mortgage reduction.
You could sell the house as a short sale, however, that may negatively impact your credit. Most short sales negatively impact individuals credit because they are behind on their mortgage rather than the short sale itself, but that is not to say that it won't negatively impact your credit.
The third option is to do a deed in lieu of foreclosure. This should be your absolute last option because it will impact your ability to buy a home in the future.
For more information please feel free to visit my website below .

June Piper-Brandon CDPE, CIAS, ePro
Associate Broker
Advance Realty Professionals
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