**You are not my advisor. I realize you are probably typing this with Cheeto dust on your fingers in your Mom’s basement. Thus ends the disclaimer.
We had financial woes. My wife and I both went back to school and she graduated nursing school last summer and I graduate this summer. There is light at the end of the tunnel.
We are both on the title of our home, but I am on the mortgage alone. We got behind and our bank reworked the mortgage. My credit is shot. Low 500s. Wife’s credit is in the upper 600s and climbing.
We owe about $200k. The house is valued at about $182k. The house needs about $10k in upgrades. Needs new HVAC, deck replaced, picture window replaced, fence, carpet/floors replaced. The house is in a great school district.
We want to move to Florida at the end of next summer. We need a strategy on how to best do that. I think our options are:
**Stay in the house until next summer. Walk away from the house using the money we save not making the mortgage for a few months towards our new life in Florida. This effectively continues my poor credit and I can’t begin the (lengthy) rebuild process until then. My wife will have to be on the new house alone which will be a challenge.
**Make the payments. Make the repairs. Hope the value climbs. Sell the house. This is the most advantageous to my credit. But if we sink the money and still can’t sell the house, we are screwed.
**Make the repairs. Keep the house as a rental. It really would be a great rental home. Rents are about the same as my mortgage ($1300) so there is no room for error. Being a landlord scares me. But this scenario does allow my credit to improve in the mean time if we continue to make the payments.
What do you suggest? Any more info you need? Just looking for a strategy.
How much can you afford to spend immediately on repairs?
Renting can be an attractive option, but being an absentee landlord can be difficult. If there’s a problem you need somebody on-site to fix it. In the unlikely event that you need to evict someone, being out of state can make things very problematic. So you’ll probably want to hire a good property manager, but that will cost you a cut of the rent.
We could make the repairs now. We could pay about $4k and my wife could get a loan for the rest. We could easily make those payments which would help her credit even more.
We have a home warranty and I am submitting a claim for the HVAC but I am expecting them to wriggle out of it somehow. If they cover it, that’s $3k off the repair cost.
I have a brother in law that is a handy man who would help with any repairs. He lives 5 minutes away. My father in law was in real estate management so he would help file pay or quits and process evictions. He’s retired and would be glad to help. Still - rental scares me.
Is your house worth $182,000 as is? If not, then it’s not worth $182,000 until it’s fixed. Have you talked to a realtor and gotten a CMA and recommendations about what and how to update things?
As an aside on the question you did ask, how did you manage to get both on the title and only one on the mortgage? Most lenders I know about require that the title match the loan (although I suppose this may be state-specific).
Is this with or without the upgrades? Can you do some of the work yourself to make the upgrades cheaper, and/or will the upgrades raise the value more than they cost?
What are property values doing in your area? If values are climbing fairly quickly, you’ll get different answers than if they are growing only slowly, or even actually declining.
Live where you are until they kick you out (store stuff in a storage unit so you can leave quick), use the money you save from not paying the mortgage to rent short term when needed. Banks are slow, they may not kick you out for a long time, which gives you that time rent and mortgage free.
This is IMHO so I feel OK saying that this would make me feel very uncomfortable. The bank didn’t cause the problem so it doesn’t seem fair to take it out on them. But I’m also not facing the prospect of losing my home so I have the luxury of a detached view.
Depending on where you live you may not be on the hook for the mortgage once you sell your home. Try to find out if that is the case in the state you live. In general most home repairs do not give a positive return, I would contact a realtor and find out which repairs are necessary to sell the home and only do them, plus whatever is necessary for the home to be comfortable in while you live there.
Since you will presumably want to buy a house in Florida you should probably not stop your payments or declare bankruptcy. Neither is worth doing for 18 grand, unless you are anticipating a very low income for the foreseeable future.
Renting is a good but risky idea, check the laws to see how fast you can get kick a deadbeat renter out. In most states tenants rights make you wait so long a bad renter could be disastrous.
My advice is to try to sell the house, eat whatever loss you make for the sake of your credit and only stop making payments if you can’t sell it.
If your in-laws (brother and father) are willing to serve as property managers, and you think you can rent it for at least the current payment, that seems like the way to go. If the market never recovers, you can always do BK or a walk-away later.
Assuming your 182 vs 200 number is based on someone’s professional opinion, you could also talk to the bank about a short sale - they’d probably end up with more that way than if you do a bankruptcy.
And, on bankruptcy - it wouldn’t be just getting rid of your mortgage. If your overall assets are larger than your liabilities, you won’t be able to go that route.