Keep Paying the Mortgage

• The best option for many homeowners whose homes have declined in value is to simply stay put and keep making regular mortgage payments, according to Michael Kitces. Kitces, a certified financial planner for Pinnacle Advisory Group in Columbia, Maryland, explained to the financial website Bankrate that homeowners with negative equity may benefit from remaining in the home and waiting for a future opportunity. As the homeowners continue to make regular mortgage payments, real estate values will eventually recover and restore equity in the property. While waiting for the values to recover, homeowners who continue making payments will reduce the outstanding mortgage balance and help restore positive equity.
  
  

Rent the Home

• Homeowners who absolutely cannot remain in the home may be able to rent the property to cover some or all of the monthly mortgage payment. Mari Adam, a certified financial planner with Adam Financial Associates in Boca Raton, Florida, explained on Bankrate that renting the property may free up enough money to move and make payments on a new property in a different location. Lenders may require a copy of the lease to meet debt-to-income ratio requirements, though, and homeowners should stash away a cash reserve to cover mortgage payments if the tenant should move out or fall behind on monthly rent.
  
  

Short Sale

• A short sale allows a homeowner to sell property for less than the outstanding mortgage balance. When a homeowner cannot continue making mortgage payments and equity in the property will not cover the outstanding balance, lenders may consider a short sale arrangement to prevent the expense and hassle of foreclosure. Some homeowners have difficulty convincing a lender to enter a short sale agreement. Because the lender must review short sale offers, too, the sale process can take considerably longer than a traditional real estate transaction. Finally, Kitces points out that short sales will hurt the homeowner's credit score, though not as much as going through foreclosure.
  
  

Forbearance

• Homeowners with negative equity who experience temporary difficulty making monthly mortgage payments may be able to negotiate a forbearance with the lender, according to the home loan website Mortgage Professor. In a forbearance agreement, the lender allows the homeowner to make reduced mortgage payments during a period of financial hardship, then catch up the deferred payments when conditions improve. Though not all lenders will agree to a forbearance, this type of arrangement can help a troubled homeowner stay in the property until values rise enough to restore positive equity.