When facing foreclosure, it’s essential to know your options to avoid losing your home and damaging your credit. One popular option is a short sale, where you sell your home for less than what you owe on the mortgage. However, like any other solution, there are pros and cons of short sales that you should consider before making a decision.
Pros and Cons of Short Sales:
Pros of Short Sales
Get out from a bad situation
A short sale can help you get out of a bad situation when you can’t afford your mortgage payments. Or it can help when you have negative equity in your home. It allows you to sell your home quickly and move on with your life.
Protect your credit score
While a short sale impacts your credit score negatively, it will be much less damaging than a foreclosure. It will show up on your credit report as a settled debt. This allows you to be able to recover faster and qualify for a new mortgage sooner.
Qualify for a new mortgage sooner
After a short sale, you may be able to qualify for a new mortgage sooner than if you had gone through foreclosure. Depending on the lender and the circumstances, you may be able to get a new mortgage in as little as two to three years.
Reduce your house payments: A short sale can help you reduce your monthly mortgage payments and make them more affordable. This can help you avoid defaulting on your loan and facing foreclosure.
Cons of Short Sales
Still receive a negative impact on your credit score
While a short sale is less damaging to your credit score than a foreclosure, it still has a negative impact. It can lower your score by 100 to 150 points. It can also stay on your credit report for up to seven years.
Your lender may decide to pursue an additional balance
In some cases, your lender may pursue the remaining balance that you owe on your mortgage after the short sale. This is known as a deficiency judgment and can be a significant financial burden.
You may have to pay taxes on the forgiven debt
If your lender forgives the balance on your mortgage, you may be required to pay taxes on the forgiven amount. This can result in a large tax bill and further financial strain.
Is a Short Sale the Right Option for You?
Short sales are not the right solution for everyone facing foreclosure. However, they can be a viable option for those who are struggling to make their mortgage payments. It is a great method to avoid foreclosure. It’s essential to consult with a qualified mortgage relief specialist who can help you weigh the pros and cons of short sales. You’ll need to determine if it’s the right solution for your unique circumstances.
At Mortgage Relief, we offer free consultations for a limited time. Contact us today to schedule your appointment and learn more about your options for mortgage relief.