What exactly happens when you owe more than your house is worth?
May 30th, 2009
Ok. This blog is called 'upside down mortgage' so I thought it is an appropriate place to ask this. What happens when you owe more money than your house is worth. I have read a few things but what exactly is going to happen. For example, you owe $200k on a house, the house is worth $100k in the market right now (surprise surprise, well it is not that bad but it is still bad), if the bank forecloses on the house and the bank sells the house for $100k, do you still owe the other $100k or does the bank take the loss? Can the bank come after you for this? If your mortgage is current, how long does it take until you hit the foreclosure period and kicked out of your house?
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The bank will sell the house for the amount left owing on the mortgage plus any fees it incurs as a result of the foreclosure. These would include the attorney’s commission, filing fees, publishing in the paper, etc. If you owe 200k on the house and it forecloses, it will be sold for 200k plus the above mentioned fees.
If your mortgage is current, how long it takes until the foreclosure begins depends on the lender. Usually it’s several months, then the foreclosure process itself takes several more. Altogether, there is usually about 6 months between that first foreclosure letter and when you have to be out of the house.