If they can continue making the payments, they can do that to try to stay in the house. If they can't continue making the payments, they should call the mortgage holder and see if there is a possibility for a short sale and if so, put the house on the market.
Otherwise, stop making any payments and save up as much cash as they can to move into an apartment, and let the house go to foreclosure.
They should talk with a realtor to see if the $100,000 appraisal is realistic. In some parts of the country, prices are starting to get a little better.My parents are on a ballon mortgage and the principal is 274 K. What would be the best options for a hardship?
So, back track.
*WHY* is this an issue?
Did one or both of your parents lose a job?
Did one or both of your parents accept a job in another city?
They knew when they bought the house that there was a balloon payment coming do in x years. They knew their income at the time they bought the house. So unless they have to move or they lost a job, why is there a hardship? The fact that the house has dropped in value only matters if you need to sell.
The best would have been not to get a balloon mortgage in the first place especially if the property was that over inflated. There is not a thing that your parents can do but find some how the money to cover this balloon payment due shortly. I have not heard of any area where the home prices have fallen by 2/3rds.
walking away and declaring bankruptcy - they will never be able to refinance is the value has dropped that much
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