“SHORT PAYOFFS” REALLY CAN PAY OFF
Today’s economy has brought many Americans to the unfortunate situation of not being able to afford their homes any longer, due to an unexpected job loss or the real estate mortgage crisis, many are being forced to sell their homes in an unfriendly market. Just imagine not having to use a debt consolidation company or enter into a debt management plan.
As more and more homeowners find they are unable to pay their debt and are forced to default on their mortgages, banks are becoming a little more cooperative in trying to help homeowners sell their properties, rather than having to go through time consuming and costly foreclosure proceedings.
The newer term “short payoff” is another version of the “short sale” which still allows homeowners who find they owe more debt than their property is worth, or rising interest rates they can no longer afford, but with a little twist that benefits both parties.
For homeowners that can show verifiable debt hardship, they will not have to come up with any monetary contributions in order to sell the house, and the lender agrees to sell the property for less than the debt owed, but the seller must agree to repay some portion of the shorted mortgage amount. This is usually accomplished over a period of time in the form of an unsecured line of credit or promissory note at very low interest rates.
The benefits to the seller are the obvious release from a property that is upside down, in other words the debt amount owed is more than the property is worth and more importantly has the least impact on the seller’s credit scores, as opposed to a short sale or even worse foreclosure.
Another plus for the seller is that once a short payoff debt is negotiated with your bank, it is highly unusual that the lender would go after the seller for a deficiency debt judgment after the short payoff debt agreement has been made. Many companies will provide consumers with free debt consolidation advice.
While this is not an ideal solution for homeowners struggling with debt management during these difficult times, it is one more option out there to help protect their credit rating and eliminate an untenable mortgage debt.