How to Relocate With an Underwater Mortgage

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Your employer just offered you a new job -- complete with a hefty raise -- across the country. The challenge? You need to sell your home before you move. And you happen to be underwater, meaning that you owe more on the loan than what your home is worth. Selling such a home isn't easy; buyers won't be likely to pay enough for your home to allow you to pay off your mortgage loan. Fortunately, you do have options.

Sell your home at a loss. This isn't ideal; homeowners want to make at least a small profit when they sell their home. Selling at a loss, though, means that you'll have to cut a check to your mortgage lender. If you sell your home for $300,000 and you owe $350,000 on your mortgage, you'll have to pay your lender $50,000. If you are especially eager to unload your home before you move to your next job, this might be your quickest option.

Reduce your principal balance. You might not have to sell your home for a loss if you can persuade your mortgage lender to reduce the amount of money you owe. If your home is worth $200,000 and you owe $230,000, a principal reduction of $30,000 would reduce your losses if you manage to sell your home for its appraised value. Your lender might participate in the federal government's Principal Reduction Alternative program, a program that provides financial incentives to lenders willing to reduce the principal balances of consumers who owe more on their loans than what their home is worth. If your lender is participating in this program, it might be easier to convince it to reduce the amount of money you owe.

Rent your home as you try to sell it. If you don't want to take a loss on your home sale, and if you can't complete a short sale or a principal reduction, you can rent out your home after you relocate. You might even be able to charge enough rent to cover much of this home's monthly mortgage payment. You will, though, be responsible for maintaining the home and handling any emergency repairs. Because you will be living elsewhere, you might have to hire a property management firm to handle this work. Make sure, though, that you meet any requirements of your mortgage lender. Some loans require you to live in a home for a certain amount of time -- often at least one year -- before you can rent it out.

Ask your employer for relocation assistance. Many companies will provide financial or professional support when they ask employees to move. Some companies might provide their own real estate professionals to help sell a home more quickly. Others might even cover all or part of the home's mortgage payments until it sells. Some might cover the loss if you have to sell your home for less than what you owe on it. Before taking a new position, ask your company what relocation benefits it offers.