A common problem for those saddled with a large mortgage is that they end up house poor. Essentially, being house poor means that you have no money to pay for emergencies, extras or to save for the future because the price of your loan repayments is too large.
Evaluate the situation and see if it is temporary or permanent – this then allows you to take the next step. If your situation is temporary and will only last for 2-3 years then you will most likely need to take little action. Perhaps cut down on luxuries and extras. However, in the case the situation is a longer one then you may need to make large changes to the situation.
Of course, if it is a permanent situation you can always look for an alternative to fund it. This may mean taking on extra work, changing career or doing some extra freelance work. This can bring your income up and also remove you from being house poor.
One of the most important things to do if you are house poor is to consider some options that may seem outside the normal. Some areas of the country have astronomical home prices, whereas others are a lot more affordable. If you own a home in one of the more expensive areas, you can always consider moving to a less expensive one and taking a different job. Though, this may seem like a radical move, it can have significant benefits and free up your salary somewhat.
You can always sell your home and use the money you receive to move to a smaller house, or perhaps even rent. If you are a little limited financially you should be thinking how can I sell my house fast? Doing this as quickly as possible to ensure you don’t end up struggling for longer.
Of course, if you are facing foreclosure you may have to talk to your bank about a short sell. This is where the bank accepts the price for the house as a cover for the remainder on the mortgage and allows you to release the title to the new owner.
Foreclosure can be an option if you cannot sell your home, or if the house is in negative equity and it cannot be sold at a high enough cost to cover the cost of the loan.
Don’t repeat the same Mistakes
If you do go ahead to purchase new homes try and ensure that you don’t make the same mistakes again. Following rules such as ensuring that the mortgage is 2.5 times your salary or 25% of your income help here and can ensure you won’t have such problems again.