Maybe letting the house go

We bought a house a few years ago for 113,000. Small two bedroom with a big yard and three stall garage. House is old though. A hundred years or so…but it was close to the wife’s in laws and a pretty good deal at the time. Well now we have a larger family and it’s getting time to either expand or move. We can’t sell the house for what we owe on it. If we sell it at a loss, we have to make up the difference. However…if we let them forclose on it, then what happens? We are paying PMI, almost two hundred dollars a month, so wouldn’t that cover the risk of them coming after us? I know I should speak with a banker or a lawyer or something about this but I thought I’d throw it in here to see what other people had to say. Yes I know our credit would suck for a while, wouldn’t be the first time, but if it takes a few months to forclose and kick us out, that’s payments we can put in the bank for emergencies or a future downpayment or whatever. So, we need a bigger place, need to get a cheaper place for the time being, and need to make the best decision for us. Will it be better to forclose now while lots of other people are doing the same thing or won’t banks look at that a couple years from now? If we had to get rid of it would I bet better off selling at a 15 thousand dollar loss give or take or just letting the bank have it? what are the risks I’m taking with forclosure?

I am not a lawyer or a real estate agent or anybody who can realistically help you with this, but I can tell you that one thing you should consider is your very specific real estate market - ours is picking up, I’ve heard. A few months from now would you feel stupid for considering it?

ETA - can you put a kid in the garage?

I don’t even play a lawyer on TV! But I would seriously counsel taking some legal advice.

You may sell your house at a 15k loss. but the bank may sell it at a much greater loss ( claiming off your insurance for the shortfall) Say for arguments sake they take a 50K hit on the selling price. Add in legal fees you could be looking at a deficit of maybe 60k. If the insurance pays it off the insurance can now come after you for that 60K which would no doubt attract interest payments and other fees.

Am guessing you are in the US so the insurance cover may be different but certainly in the UK mortgage protection insurance is payed by the householder with any benefit going to the lender and a road open for the insurer to claim back his outlay from the delinquent mortgagee.

Please take some sound legal advice.

Thanks guys, I will definitely look into some legal advice but aren’t I paying mortgage insurance for just that reason? I mean I’m shelling out 200 dollars a month…for what? If I wreck my car, as long as I’m not doing anything illegal, my insurance company doesn’t come after me for the money they spent to pay off the loan. If my house burns down, again without anything illegal going on, the insurance company doesn’t come after me to pay for it. Why is mortgage insurance any different? I mean if the bank was paying the insurance, then I guess I could see maybe something there, but if I’m the one footing the bill, shouldn’t I be offered some protection as well?

Also, I do live in the US…MN to be exact if that helps.

The market is slowly picking up, I’ve noticed here in Michigan, where we have been absolutely farked hard.

Talk to a lawyer or someone who specializes in this kinda thing just to make sure you have all the information to make a proper decision that can affect you for many years to come.

It is my (completely non-professional) understanding that PMI protects the bank, not you. Thefefore yes, those insurers could come after you in the event of a short sale. Would? No idea. I know you would be paying it as a condition of your loan - either because your credit isn’t good enough or your down payment wasn’t big enough.

Please get legal advice, also insurance advice.

The mortgage insurance is strictly to protect the bank’s interests, not yours. Your credit will still take a huge hit if you get foreclosed on, but the bank will be A-OK! If you get foreclosed on now, good luck trying to buy a house within the next seven years, since that’s how long it’ll stay relevant on your credit reports. Yes, mortgage insurance is a ripoff, that’s why people don’t like it.

If you can still afford your house payments, I would stay where you are for another year, two more tops. Also, look into refinancing. If you got your mortgage a few years ago, interest rates were higher and you can lower your payments by hundreds of dollars just by getting a 1% lower rate. If you’ve paid off 20% of the loan (or have 20% equity) you can get rid of the mortgage insurance, another money saver.

Talk to some mortgage brokers about this. Yes, more than one. Go to your bank and talk to them, and also find one recommended by a friend.

Yup as I said I am not in the US nor have any experience of your system.

Mortgage protection insurance in the UK definitely just protects the lender. You default and they pay the bank and then come after you for their outlay, - even though you paid the premiums!

Just really want to stress that you should take some sound legal financial advice. The good thing going for you is that its prolly in the banks interest to come to some sort of agreement with you.

good luck

If it was a good deal at the time it will be a good deal in a year.
If you can afford to stay, do so.
I had to sell when I divorced and my wife was no longer adding her salary to mine to make payments. But the market was down and we both took a bath. Naturally, the market eventually rose, it always has. And the guy I sold it to cashed out with a bundle. Made me cry. Boo hoo. What a fool I was.

So, if you foreclosed on your house… how the hell would you expect to get approval on another, bigger, house??

And yeah, PMI protects the bank, not you.

There are loan modification programs out there right now that will adjust your mortgage to the current appraised value. An attorney or accountant would have more info about this.

The trick is to get approved on the new mortgage BEFORE your old mortage goes into foreclosure.

You know, kids double up in bedrooms pretty well, especially when they’re small. Are you sure you really need to move right this instant?

Why would a borrower opt to pay extra for PMI?

No kidding - my house has three bedrooms if you really stretch. In 1930 it didn’t have the porch enclosed, although in summer it was probably a sleeping porch, and it had one bathroom. In the 1930 census there were seven people living here, three of them adults. I bet you didn’t hear them complaining, either.

Not necessarily. not that I’m encouraging anyone to foreclose on a house on purpose, but the banks will give loans much sooner than seven years. They just charge a higher interest rate. I know one couple who bought a home two years after a foreclosure. Another couple who manages to attempt the house buying thing every few years with not only foreclosure on their record but bankruptcy as well. It may be harder to find high risk loans right now, but the banks made a lot of money off those loans and they will never go away completely.

How handy are you? can you do an addition to the home? If you do the work yourself, home remodeling costs between 25 and 50% of hiring a contractor to do the same thing. A bedroom addition (no bathroom) is one of the cheapest rooms you can add to a home.

I have a problem with someone deliberately stopping payment on their house just because it doesn’t fit their needs. If you’re talking about a job loss or a catastrophic illness, that’s one thing. But it appears you’re able to pay your mortgage, but you don’t want the house anymore.

If I were you, and we needed a bigger house, I would do one of two things. Either talk to a lawyer/real estate agent about the possibility of a short sale. This allows the house to be sold for short of what you owe on it. The mortgage company may be willing to forego the difference, if you can show that the houses in your market are going for X instead of Y, and this is the best they’re going to get.

Or, secondly, I would build additions onto my current home. That will increase the value of your home, allow you the extra room you need, all without destroying your credit.

Exactly. Move whatever you can into the third garage bay to free up space in the house, including out of season clothes, etc. See how else you can consolidate or reorganize to maximize the space you have.

You can’t get a mortgage without either a substantial downpayment or PMI.

I keep coming back to this thread because I have been in a similar set of circumtances albeit several decades ago.

hopefully you have read enough to realise that walking away from the property will give you and your family a shitload of head aches for years to come. Don’t do it dude

Look at it from this angle for a minute ( bearing in mind that am just an internet dude and prolly haven’t a clue what am talking about!!)

If you sell you are going to be saddled with a 15k loss, possibly more with fees on any sale.

If the bank forecloses then if they sell it for a rapid return you could be looking t repaying the insurance company a bucket full of money far in excess of 15k!

Someone pointed out earlier that you may get a cheaper interest rate if you renegotiated your loan deal.

You haven’t given any indication that you don’t like the place or the neighbourhood, you say that it has a three stall garage ( dunno what that exactly means am thinking mens room stalls but know that can’t be it)

Have you thought about renegotiating your mortgage and taking on some remortgage cash to develop your garage or add an extension? family living place solved, maybe cheaper payments and a better developed house for when the market turns up ? ( and it will)
Am sure the bank would rather keep you in your home and happy than going throught the foreclosure route.

last thing… wtf is with this $200 per month MPI? I seem to remember in my case years ago it was a one off payment of $3000.

can you renegotiate that? or find another policy?