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Posted April 25th, 2012 under Underwater Mortgage

Underwater Mortgage Info for Landlords

Tags: stop foreclosure, underwater mortgage help, underwater mortgage info

Underwater Mortgage Info for Landlords

Individual homeowners aren't the only people who may be in need of underwater mortgage help. Landlords, whether they one just one rental property or many, have also had to deal with the problem of having a mortgage that exceeds the value of the property. This can be a particular challenge if the income the property is generating is not enough to cover your mortgage payments. Unfortunately, if you're dealing with an underwater rental property, your options may be somewhat more limited than they would be if you were living in the home as your primary residence.

First, renting out a property (instead of living in it full-time) can have an impact whether you're protected by anti-deficiency laws, in addition to affecting the tax consequences you'll face if your lender forgives a portion of your debt. Basically, if you're not living in the home at the time of a short sale or foreclosure, you won't be protected by the Debt Relief Act. Depending on your specific situation, it may make sense to move back into the home prior to the short sale or foreclosure.

Second, if you have tenants living in the property, you may face a range of challenges as you try to stop foreclosure. While many people seeking underwater mortgage help opt to pursue a short sale, this may be more difficult if you have tenants. Buyers may be less interested in the property if there are tenants currently living in the home, since they'll be legally required to give them 90 days to move after the sale is completed. Second, if you stop making mortgage payments, your lender will eventually put a "notice of default" sticker on the property. Your tenants will see this, and there's a chance they'll stop making rent payments to you as a result. Because of this, you may want to encourage your tenants to move when their lease is up, or as soon as is legally possible, if there's no lease. While the conversation may be awkward, it's probably best to be upfront with your tenants about your underwater mortgage problems.

Finally, if you converted the home into a rental property, that may affect your tax basis. When it comes to taxes, you determine your basis based on either cost or fair market value, whichever is lower. If you converted after the home was already underwater, you'll likely have less basis to help you mitigate the tax consequences of any debt your lender forgives.

Fortunately, there are options if you are seeking underwater mortgage help for a rental property. The best choice for your depends on your specific situation and needs. (For example, did you purchase the home solely as an investment property, or are you simply renting out your former residence while you live elsewhere?) With Homeowner 101's Underwater Homeowner Assessment and Action Plan, you'll get the underwater mortgage info you need to move forward.