An upside-down mortgage is a heavy burden to bear. You are probably behind on payments, don’t really care about the property, and feel like you’re drowning. Being underwater on your mortgage means you owe more than your house is worth. Though the situation may seem hopeless, you do have options. Some involve selling the home with repercussions, while others should be last-ditch efforts. Here are ten ways to deal with an upside-down mortgage and get some relief.

How Can I Sell a Home with an Upside-Down Mortgage?

Short Sale

If you’re facing financial hardship and can prove it, your lender may allow a short sale, meaning you sell your home for less than you owe. You are then able to price your home accordingly and the lender will take the loss. Short sales make your credit score go down—and some lenders will not do them.

Strategic Short Sale

A strategic short sale is one that doesn’t require money woes. It’s just something you want to do to offload the property and decrease debt. Again, if you want to short sell your home, your lender must allow it and your credit score will be affected. However, there’s even less chance a lender will do a short sale without hardship.

Take the Loss

To sell your underwater home the traditional way, you must have the money to pay the difference between what you owe and what it’s worth. If you have enough savings to cover the gap, you won’t have to worry about your credit score being affected, like in a short sale, but you will lose money. Another way to offload the home without putting it on the market is selling it to a cash buyer. You will likely also take a loss, but the process is much faster than hiring a realtor and making renovations. 

What Else Can I Do with a Home Underwater?

Build Equity

Staying in the home and getting back right side up will take some time. You might need to get another job and make budget cuts in order to put every penny of income toward your home. But the more you pay down the principal, the faster you can build equity and refinance later.


The Home Affordable Refinance Program (HARP) is a way to refinance an upside-down mortgage. You have to meet certain criteria and the program won’t help you sell your home for a profit. However, it will give you a financial break in terms of a lower interest rate and a lower monthly payment.

Exchange of Security

An exchange of security is when you use equity in another property to make up the difference on the underwater home. The homeowner must own the second property free and clear. The lender may let you trade the security for the mortgage from the underwater home to the house with no mortgage.

Deed-in-Lieu of Foreclosure

A deed-in-lieu of foreclosure means the homeowner gives up the home to the lender before foreclosure, and the lender forgives the remaining balance on the mortgage. This move avoids the cost and time of the foreclosure process. No one gets evicted and the homeowner gets out of the situation faster.  You can also prevent foreclosure by selling your home to a cash buyer. While you will still be responsible for any mortgage balance not covered by the investor’s payment, you’ll be able to move quickly if necessary.

What Are My Options of Last Resort?

Strategic Default

In a strategic default, you just stop making payments because you think the value of the home will never recover and it was a bad investment. This is not a good option (and it’s one step away from foreclosure) but people still do it. Your credit score will take a nosedive and the incident will remain on your report for several years.


At the point of foreclosure, your lender gets your home because you are no longer making payments. You will be evicted and the lender will try to sell your home ASAP to try to recover as much money as they can. You’ll have to wait seven years before you can get another mortgage and your credit will tank.


Along with the last two options, bankruptcy should be a last resort. Chapter 13 means you will be put on a plan to repay some or all of the debt. Chapter 7 means you will lose all or most of your assets with any remaining debt being forgiven. Like strategic default and foreclosure, the consequences of bankruptcy last for years. You can avoid any of these desperate tactics by selling your home to a cash buyer. You will still have the remaining mortgage to deal with after you use the investor’s check to bring down the balance, but there won’t be any long-term credit implications or the need to sell what you own.

What If I Want to Avoid Foreclosure and I Need to Sell Now?

Dealing with an underwater mortgage is exhausting. However, you do have a range of options that will free you from the burden.  Selling your house at a loss or taking a hit on your credit score will set you free. Building or exchanging equity, refinancing, or giving up your deed to the lender can offer some relief. The paths you don’t want to go down, if you can help it, are strategic default, foreclosure, and bankruptcy. If you don’t have the time, money, or patience for any of the above options, there is a way to avoid foreclosure and sell your house fast. New Again Houses® buys homes in all conditions for cash and we can close in as little as seven days. We’ll make you a fair offer so you can pack your bags, walk out the door, and leave all the anguish behind.