Orlando Short Sale Question: Should I Stop Paying My Mortgage During The Short Sale Process?

We are often asked by short salesellers whether or not they should continue paying their mortgage payment while they attempt to short sell their home.

Click here to discover how other sellers successfully did a short sale and avoided foreclosure.

Here is the quick answer. Yes, if you care about your credit rating. No, if you don’t care about your credit.

However, many people think that in order to be eligible for a short sale you must stop paying your lender. That is not true. Many lenders will approve a short sale, even if you are current on your payments.

They will consider a short sale based on another hardship, such as a job transfer, job loss, or if you foresee that you won’t be able to make the payments in the near future.

Should you stop making your payments? I am not a lawyer, and therefore cannot give legal advice. I can only tell you my opinion. It all comes down to what is most important to you.

If reducing damage to your credit rating is important, then continue paying for as long as possible. Continue paying your lender until the sale closes.

Halfway into the short sale negotiations, the lender may tell you that they will not process the short sale until you are late on the payments. At that point you can make the decision to continue or stop making payments.

There are some reasons to stop paying your lender during a short sale.

1. You are tight on money. Yes, you will suffer additional credit damage. But, the benefit of using that money for other bills may outweigh the credit damage.

2. You are concerned about a deficiency judgment or promissory note. Many lenders will ask you for a promissory note if they think you have the extra money.

If you want to reduce that likelihood, then you can decide to stop paying. That decision comes with all the side effects such as credit damage and other problems.

Many people also say that is unethical. (I am not going to comment on that. One could make the argument both ways. Every person has to decide what is best for them and make their own personal choices.)

Disadvantages of not paying your mortgage.

1. Credit Damage. You will suffer more damage to your credit. That credit damage should go away in 2-3 years.

In addition, some people use a dispute strategy to get the derogatory marks removed much faster. Some get them removed in 6 months.

The point of this article is that contrary to public opinion, you do not have to stop paying your lender in order to short sale your home.

You can minimize the credit damage by continuing to pay until the short sale closes. Thinking about a shortsale?