Mortgage payments are really mandatory if you want to forego short sale and foreclosure. Foreclosure is worse than short sale and has worse effect on your credit scores but short sale also has a lot of negative effects too. If you default in your mortgage payments, there are a lot of options to select from rather than going for these drastic steps. You can ask for the latest refinancing mortgage rate so that you can refinance your previous mortgage to be able to make payments regularly.

Negative aspects of short sale

Refinancing your previous mortgage is anytime better than selling off your property for less in an auction. You go for short sale because the mortgage payments left are more than the value of the house. Take a look at the negative side of going through a short sale:

1. Home is lost forever

This is the first and foremost disadvantage of having a short sale done on your home. If you lose your home, you’ll need someplace to live. That’ll be a bit tough for you. You need to save a lot for the rents and if you think of taking out a mortgage, you’ll need to have a good credit score. That’ll take around 1 to 2 years to take out a mortgage and buy a home. If you take out a refinance mortgage, you can build the equity on your house as well as retain your property.

2. Slow and tedious

This is really a very slow process that may take a lot of precious time of yours. This is a long process and there is no way you can make it a fast one. You need to get the approval of your lender and have to show that you’re facing hardships. The lenders may take a lot of time to approve your short sale. Then there are a lot of legalities that you have to complete before you go for the short sale process. Before you actually complete these formalities, you lose a prospective buyer.

3. Credit score gets damaged

When you go for short sale, your credit score goes down by 80 to 100 points. This is really damaging if your credit score is not that good. You may take 1 or 2 years before you can take out a mortgage or any other loan once again. The lenders put short sale and foreclosure as “not paid as agreed” to the credit reporting agencies and this really puts you in a worse situation that you were in. But this is anytime better than foreclosure but it’s advisable that you go for refinance mortgage to save yourself from all these situations.

4. Debt forgiven but the taxes are not

The IRS may view your discharged or forgiven debt taxable. So, if larger debts are discharged, you’ll be levied more taxes by the IRS. But if you have any doubts regarding this, you can log onto the website of the IRS to get more information on it.

These 4 options can really put you in more trouble that you had thought of. Try to pay your mortgage regularly to avoid any of these and if you cannot, go for refinance mortgage. You’ll also have a better credit score with this option.

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