When the housing bubble burst, many homeowners carried more on their mortgages than their homes were worth in the market. As you may know, that’s known as an upside-down mortgage. While this loss was only on paper, the market has not yet recovered from the housing crash, and you are probably still underwater.
If you want to stay in your home until the market values catch up with your mortgage, you might not see an impact. But if you’re struggling to pay your bills, refinancing or selling is out of the question, and you could be in danger of losing your home. To survive an upside-down mortgage, you need to clean your budget down to the minimum so you can continue to pay for your home and the mortgage you have.
Stripping Your Budget
The first thing you want to do is write down your income and all the costs you pay each month. Be sure to include expenses like food, gas, prescriptions, and anything else you pay for monthly. With unemployment approaching 10% across the United States on average, it might be faster to decrease your expenses instead of increasing your income. But if you can do both, that will create a wider gap between your income and expenses, which is exactly what you need to do.
Look at each bill in your budget and ask yourself if it’s necessary to live. If the answer is no, eliminate it completely, but if you have to keep them, contact the creditor and ask for a lower bill amount. Some companies will work with you and offer you specials for being a loyal customer, and it doesn’t hurt to ask.
The next thing you want to tackle in your budget is your credit card debt, which takes up your much-needed cash over a long period of time. Carrying multiple credit card balances not only drains your monthly budget but keeps you in a never-ending debt cycle.
How to Escape the Debt Cycle
To free yourself from credit card debt, you need to stop using them. Make sure you work with a balanced budget where your income covers all your expenses and you don’t spend money that you don’t currently have. Telling yourself it’s okay to buy the TV you want because you’ll have the money next month is not the way to live debt-free. Instead, simply wait until next month to buy the television.
While you might earn the money to pay for the item next month, you could lose your job, or an emergency could creep up on you. Then, you’re stuck with a TV you suddenly can’t afford, and you end up paying interest on top of the purchase price.
To rid yourself of the credit card balances you hold currently, consider contacting Brice Capital and asking them about debt consolidation. They’ll look at your eligible debt and offer to roll those balances into one loan with a single monthly payment, creating an even wider gap in your monthly budget. You can apply that extra money to any shortfalls you have in your mortgage, some to savings, and some to pay your debt off quicker.
Wait Out the Market
You don’t have control over the housing market recovery timeframe, but you can get control over your personal finances. Arranging your budget and revisiting it often to make adjustments will help you stay on track and survive and upside-down mortgage until the market recovers. As long as you keep making your mortgage payments and stay away from your credit cards, you can wait out the housing crisis.
And no matter how long it takes, staying on the road to a debt-free life will ensure your financial stability for the foreseeable future.