House prices have seen an almost unprecedented and steady decline. Many analysts predict that this fall will continue meaning that a lot of homeowners will not have the kind of equity in their homes that they had once enjoyed. This trend signifies a closed door for consumers that are looking to repay their debts by refinancing their mortgage because there is considerably less equity available in the vast majority of property. Because many of these consumers are also in full time employment, it means that they are unable to file for chapter 7 bankruptcy. Fortunately, though, a viable and beneficial alternative exists in the shape of the debt settlement program.
Analyst Predictions For House Prices
The fall in house prices has been well documented and figures are expected to continue their decline. Many analysts predict house prices to fall as low as 20% below 2005 prices, with some reasonably expecting this drop to be as much as 25%. Because of this drop in prices, it means that many homeowners will owe more than their property is worth. When this occurs, it becomes impossible to refinance a mortgage because there is no equity available in the value of the property.
Refinancing To Repay Debt
Mortgage refinancing has long been seen as one of the most beneficial methods of reducing debt. Mortgage loan rates are considerably lower than any other form of credit. Using the equity that has been built up through repayments and rising prices means that unsecured debts can essentially be converted into more affordable debt. However, very few homeowners now have that possibility open to them.
House Prices Effect Us All
It isn't just sub-prime borrowers that are feeling the crunch. Regardless of home value, prices have already dropped significantly and lenders are less willing to take a chance by offering the same level of refinancing as they once were. The situation will continue to deepen even for the affluent prime borrowers. The fixed rate period that prime borrowers enjoy is typically longer than those associated with sub-prime mortgages. However, once these extended periods end, repayments will also rise for the more affluent borrower.
Why Bankruptcy May Not Be An Option
This means that refinancing a home mortgage to repay other debts will no longer be an option for most consumers. Those in serious financial trouble will obviously be the most effected. Bankruptcy should only ever be treated as a last resort because it can have knock-on effects for many years to come. For those in full time employment, chapter 7 bankruptcy is unlikely to be available at any rate.
Debt Settlement - The Viable Option
A professional debt settlement program may be the best option for most consumers facing this financial predicament. Once a consumer enrolls in a program, they work with a debt consultant to determine their living expenses. The consultant, along with a professional underwriting department, evaluates a repayment plan that suits creditors and debtors alike. Once the consumer agrees to this plan, the debt settlement company will then negotiate with creditors to agree a reduced repayment schedule. This can result in a debt reduction of as much as 60% and using a good debt settlement company will ensure that the consumer becomes debt free within three years.
Beating The Negative Impacts Of Bankruptcy
The negative impacts of a debt settlement program are easier to bear than those associated with bankruptcy. Bankruptcy courts will use average figures to determine a living allowance, and this can mean the forced sale of a consumer's car or house. Bankruptcy also remains on credit history records for between seven and 10 years and remains on court files for 20 years. Potential employers can also refuse employment on the grounds that a candidate has filed for bankruptcy in the past.
