It’s a statistic that might mean increased business for companies offering debt consolidation services: A growing number of homeowners across the country are underwater. This is something that you don’t want to be. It means that you owe more on your mortgage loan than what your house is worth. According to real estate Web site Zillow.com, 23.3 percent of homeowners with mortgage loans were underwater in the first quarter of 2010. That’s an increase from the final quarter of 2009, when 21.4 percent of homeowners were in the same situation.
A Need for Debt Consolidation
This can mean busier times for debt consolidation companies. That’s because homeowners who are in debt won’t be able to tap into their home’s equity for a loan if they are underwater. They also won’t be able to take on a cash-out refinance. Simply put, if you owe more than what your home is worth, there’s not much financial good that your residence can do for you. This leaves homeowners with precious few options. One of these is to take out a debt consolidation loan. No one claims that these loans are ideal financial tools: They come with high interest rates and they tend to hurt consumers’ credit scores. But for homeowners who are struggling mightily with debt, taking out a debt consolidation loan can keep the collection agencies away and increase peace of mind.
More Underwater Owners Coming Soon?
The worst news from the Zillow.com report is that officials with the company only expect the number of mortgage-holding homeowners who are underwater to increase in the coming months. Home values are continuing to fall across the country. It’s a frustrating situation for buyers who purchased their homes in 2004, 2005 or 2006. These owners may have spent $600,000 for a house only to find that it’s worth $380,000 today. It’s not easy for consumers to make big mortgage payments when their homes’ values have plummeted, even if they can afford it.
This situation is why so many homeowners are simply walking away from their mortgage loans. They are no longer paying their mortgage, and are resigned to living in their homes until their banks or lenders foreclose and kick them out. This doesn’t often happen quickly; banks and lenders are overwhelmed these days. It’s not unusual to hear of homeowners who have been living in their homes mortgage-payment-free for 15 months or longer. But for those homeowners who need to pay off large amounts of debt, being underwater is a real problem. It may leave them with just one choice: debt consolidation services.