I Can't Afford to Pay My Mortgage

Your mortgage is too high, but you don't want to lose money on your home by selling. What's a homeowner to do? Real estate expert Tara-Nicholle Nelson has the solutions.
By: Tara-Nicholle Nelson

Related To:

Upside-down. Underwater. Walking away. What sounds like a set of cues for Aquatic Twister are actually the new-age descriptors for an age-old dilemma. The problem of owing more on your home than it is worth certainly isn’t new, but the scope -- 1 in 10 American homeowners -- is. If dropping property values have added you to the class of underwater homeowners and you need to sell or refinance your home for whatever reason, you might have the makings for a freak-out on your hands, my friend.

I Know the Feeling. And the feeling is trapped. In high finance, they call a property that is eating up funds but can’t be sold for enough to clear the corresponding debt a "toxic asset." If you’re paying a monthly mortgage on a home you can’t sell for what you owe, it might seem like Wall Street has indeed come to Main Street when the home you once loved so much starts to feel like your own personal toxic asset.

If you want to hold onto your home, the payment on your interest-only ARM is about to double and your efforts at refinancing are going nowhere because you owe more than it’s worth, it’s normal to feel trapped on a path that inevitably ends at foreclosure. Can’t sell, can’t refi, can’t afford the adjusting mortgage -- the seeming lack of options can trigger a horrible sense of helplessness and perplexity: What on earth are you supposed to do?

Your Mindset Reset. How do you go from helpless to hopeful if you’re upside down on your home? Put it all in perspective. Your home, as important an asset as it is, is just that -- a building. Even if the very worst that can happen to your home (foreclosure) does happen, that is certainly not the worst thing that could ever happen to you. Real estate matters are not life or death, and putting them in their proper perspective can be the cure for those heart-pounding, flush-inducing panic sessions that happen when you hear the house two doors down just closed on a short sale for 60 percent of what you paid for yours.

And don’t be a lemming. Were you actually planning to sell your home before market values tanked, I mean, declined? I talk to would-be sellers everyday with 30-year fixed rate mortgages they can well afford, stable jobs and homes they had planned to live in until they were carried out feet first. The claustrophobia of feeling trapped in a home can cause you to panic and decide to sell, but if you weren’t planning to and don’t need to, don’t decide to just because of the market.

Shift your mindset. It is actually okay to own a home that has declined in value and just keep on owning it, especially if it works for your family and has the potential to appreciate again when the market recovers. In fact, think like a daytrader (on this one point only!) -- selling when you don’t need to at the bottom of the market locks in your losses. And that’s bad.

If you really need to sell or refinance, being upside down is a values check -- what’s really important to you? There are solutions to help you get out of your home or your loan, but some of them might have less-than-lovely implications for your credit or other downsides. Instead of viewing your situation as a tragedy, it might be the nudge you needed to get out of your comfort zone and make some hard priority choices -- choices that could have major upsides for your life over the long term, if you face them head on.

Your Drama-Free Real Estate Rx. You get to choose how you experience this unfortunate upside-downness: call to tears or call to action? If you choose action, be on the lookout for workarounds and for lessons. You can chalk your lost equity up as tuition if you find the lessons in the situation, like ways you will approach your mortgage decisions differently in the future. And when it comes to workarounds, there are dozens of potential solutions out there for upside down homeowners, ranging from short sales to creative sale structures to loan modifications and refinances under the stimulus plan.

Talk with your Realtor to see if you might be able to unload your home, despite the deficit, and check MakingHomeAffordable.com or a local loan modification attorney to see if you might be able to fix your broken ARM before it adjusts. Then take action or calculated inaction (i.e. staying put and sitting still), whichever makes you feel right side up, even if your home’s value is upside down.

Next Up

Did I Accept a Bad Offer on My Home?

Worried you accepted a bad offer for your home? Let real estate expert soothe your fears.

Moving Day Tips: How to Pack for a Move

These 10 packing tips will help you move more efficiently and smoothly.

Short Sale Rules: What You Need to Know

A short sale occurs when a property is sold for less than what is owed on the mortgage with the lender's approval. Learn the advantages and disadvantages of this type of transaction for the seller and the buyer.

The Skinny on the Short Sale

How to get a short sale when you're facing foreclosure on a house.

What Foreclosure Means and How to Stop It From Happening

Learn about the various steps in the foreclosure process and ways you can avoid losing your home.

Advantages and Disadvantages of Buying a Home in Foreclosure

Purchasing a foreclosed home can mean getting a bargain, but there are potential pitfalls too.

How to Deal With Your Lender When Facing Foreclosure

In the foreclosure world, "workout" has nothing to do with the elliptical trainer. It's about cutting a deal with your lender to stop the foreclosure process.

How to Quickly Sell Your Home When Threatened With Foreclosure

Get tips and advice on how to sell your home fast.

Sellers: What to Do When You Can't Find a Home Before Yours Sells

If you sold your house before you've found new digs, don't worry: You have options.

For Sale By Owner (FSBO): How to Sell Your Home by Yourself

Are you considering selling your home without a real estate agent? Follow these tips to make the process as smooth as possible.

Go Shopping

Refresh your home with stylish products handpicked by HGTV editors.

On TV

Flip or Flop

6:30am | 5:30c

Flip or Flop

7:30am | 6:30c

Flip or Flop

8:30am | 7:30c

Flip or Flop

9:30am | 8:30c

Flip or Flop

10am | 9c

Flip or Flop

10:30am | 9:30c

Flip or Flop

11am | 10c

Flip or Flop

11:30am | 10:30c

Flip or Flop

12pm | 11c

Flip or Flop

12:30pm | 11:30c

Flip or Flop

1pm | 12c

Flip or Flop

1:30pm | 12:30c

Flip or Flop

2:30pm | 1:30c

Flip or Flop

3:30pm | 2:30c

Flip or Flop

4:30pm | 3:30c

Flip or Flop

5:30pm | 4:30c

Flip or Flop

6:30pm | 5:30c

Flip or Flop

7:30pm | 6:30c
On Tonight
On Tonight

Flip or Flop

8pm | 7c

House Hunters

10pm | 9c

House Hunters

11pm | 10c

Flip or Flop

12am | 11c

Luxe for Less

1am | 12c

House Hunters

4:30am | 3:30c

House Hunters

5:30am | 4:30c

Follow Us Everywhere

Join the party! Don't miss HGTV in your favorite social media feeds.