If I cannot pay my mortgage and end up in foreclosure, will I get slammed with taxes on the unpaid mortgage?

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If I cannot pay my mortgage and end up in foreclosure, will I get slammed with taxes on the unpaid mortgage?

I have moved into my fiancee’s home because he lost his job and was going to lose his house. I cannot afford both my house and his. If I cannot make my mortgage payments and end up foreclosing on my home, what happens to me with taxes on the defaulted amount of the loan? I owe about $202,000.

Asked on August 24, 2012 under Real Estate Law, New Hampshire

Answers:

M.T.G., Member, New York Bar / FreeAdvice Contributing Attorney

Answered 8 years ago | Contributor

Please do not default.  if the house is foreclosed upon you will have a judgement of foreclosure on your credit report.  The house will be sold at auction and if it is sold for less than what you owe a deficiency judgement will be obtained against you.  The lender will execute on the judgement in any matter permitted by law: garnishment, levy on bank accounts, etc.  Can you rent your house to offset some of the costs?  Can you sell it (and if it has to be a short sale - for less than the mortgage) have the lender waive the deficiency.  You can also ask the lender about a Deed in Lieu of Foreclosure, which would essentially give them back the house.  Also make sure they waive the deficiency.  And if it is easier to rent or sell your fiance's house then do that and move back in to yours. Good luck.


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