Holy shit…houses are cheap there!!! And yes, I looked at the price history of several and it does seem they are still a bit below the 2008 drop.
I could sell my little house and live like a king there!
It’s sad, but probably telling, that so many people here are approving of the OP just walking away from a contract, and from the house, basically because he just doesn’t feel like living up to the responsibility he agreed to. If the bank had a similar provision to screw the guy, we’d be on the proverbial streets with pitchforks looking for the bank.
OK, Rockford is a decaying Rust Belt city so I can understand that you’re not going to get much in the way of increase in the value of your house.
This is not enough of a savings to justify destroying your credit, IMHO. Also, rents are more volatile than property taxes. The latter typically go up by a few percent every year (or even decrease, if your house’s assessed value decreases). Rents can increase much faster, and with a terrible credit rating, you’d have little flexibility to move if your rent goes up dramatically.
Not to mention the likelihood of the lender coming after you for the difference, and other consequences of a destroyed credit rating (like the inability to get a decent car loan if your vehicle needs to be replaced in the next 7 years, or a dramatic increase in your credit card interest rate, etc.).
In short, I think the worst thing you could do is to walk away from your mortgage. You say you have “no enjoyment” and that you “get nothing out of owning the house.” I disagree. You are getting a roof over your head. Would you prefer homelessness? If you are not getting any enjoyment out of your house, look for fulfillment elsewhere in your life.
I don’t think your situation actually sounds all that bad. You have sufficient income to cover your mortgage, taxes, and insurance. Your housing costs are less than 15% of your income. Your only issue is that your house’s value is less than what you owe on it (which is irrelevant until you sell it), and that you’re no longer enjoying owning it. These don’t seem like good reasons to walk away, IMHO. If it were me, I’d suck it up and stay put. If you are determined to leave, at least wait until the value of the house is no longer underwater, and then sell it yourself.
Hire a property manager to handle upkeep if you decide to rent the house out.
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I have rented a house out for years. I have a good property manager and don’t have to worry about the details of upkeep (although I do periodically check on the home). Pluses - someone else is paying for it, and someday I will own it. I am also not tied to living in it myself. Also, in some circumstances, you may be able to deduct some items on a rental from your taxes. Negatives - you can’t always deduct, and some tenants may trash the place. I’ve never had a tenant trash my place(s) and I’ve been doing this for a long time.
If the rent will cover the mortgage and taxes (sounds like it will?), why not try it? You’re able to move around where you’d like and your credit is not destroyed.
I was incredulous that you could owe over 100k after 12 years and only fetch 80k now, but checking Zillow I believe it. Wow, the house you can get for 300k there! Anyway, I’d say do what you can to pay as much off so you can at least break even on a sale. How long you think that would take if you make it a priority?
The bank is going to do what is best for the bank. If exiting a contract is better for the bank, that’s exactly what they’re going to do. We have books full of banking laws to prevent bankers from screwing over their customers, so let’s not pretend that they feel some burden of responsibility to act in good faith.
For the OP, my mom wound up in a situation similar to yours, real estate values cratered and her house wasn’t worth enough to make selling a preferable choice. She is renting it out, it covers her expenses, maybe she makes a bit of profit, and maybe her renter will be interested in buying down the road. If that’s an option for you, it at least keeps your finances intact, you don’t have to incur expenses to sell, you don’t have to renegotiate an exit to the mortgage and you don’t foul up your credit rating.
I think a property manager and renting the house out makes the most sense: if it covers it’s own expenses, that’s enough.
Alternatively, just be indulgent. It’s going to cost thousands to walk away–thousands buys you a lot of housecleaning and yard mowing and handyman visits.
Renting the house out is another viable option, diggerwam, but realize that you are going to have to put some money into the house to make it rentable, and have money set aside (or available credit) for any repairs/maintenance that may be required. You also have to be prepared to pay for the mortgage between renters.
Note that if you live in the house, you can choose to delay or forgo non-critical repairs – but with renters, you don’t have that option. (For example, our furnace died last November, and we went without heat for 3 weeks while arranging for it to be repaired under the extended manufacturer’s warranty. A renter would not be as patient.)
IMHO, this would still be a preferable option to walking away from the mortgage, and may be an alternative to consider if you really want out of the house, but don’t want to wait until the value of the house is no longer underwater.
The rules of the game are represented by the contract that the OP and the lender both agreed to. The lender lived up to his side of the bargain: loaned the money for the purchase of the house to be repaid over 30 years at an agreed interest rate. The OP hasn’t described a situation where he was coerced into entering into this mortgage agreement. He is just unhappy with where he is today. If the OP walks away and hands the keys to the lender, that’s not really living up to the agreement, especially given the circumstances that the OP is financially in the position to continue servicing the debt. The OP is not planning on filing for bankruptcy, because he isn’t bankrupt. And according to Illinois law, as referred to above, the OP is going to be liable for the shortfall of $20k plus the 2nd mortgage of $13k, assuming that the home is valued at $80k and can be sold for that amount.
So I’m unsure what the OP thinks he’s walking away from. He still has to find another place to live, which he says is going to cost him $950-$1000 per month, in addition to paying of the remaining $33k he still owes on the house.
I also find it very interesting that many posters act like that the bank has made a killing off the OP collecting a market rate of interest over the life of the loan. That’s not making a killing, that’s just getting paid what the market says is a fair cost of capital. If the bank hadn’t loaned him the money years ago to buy the house that he wanted to, he’d been paying a landlord similar amounts of money as well.
Also consider that if the apartment doesn’t work out, you’ll have to go through a credit check with a new place in a year.
I really don’t understand what problem is so bad that you want to ditch your house and really screw up your credit rating. I figured you would be saving quite a bit every month, but it’s only about a hundred dollars. ?? It’s really not worth it.
I believe he was, but not to the point of being in foreclosure…long story short, his ex was having an affair, bolted for the BF, they needed both incomes to pay the mortgage, she refused after she left…it took about eight or nine months before he was able to negotiate everything…they might have been in arrears, but I know from subsequent conversations he has said specifically the short sale messed his credit big time…my impression is that, even if you go to the bank with hat in hand, it’s not viewed as being a positive credit event…
You might want to revisit the thread and reread the posts, there are very few people here that are “approving of the OP just walking away”, the vast majority are saying either NOT TO or consult a lawyer, and some are saying both…and there are a good percentage advising to “think about it before you act…”
As others have said, I don’t get this part. Renting is even more of a treadmill, with no endpoint. What will you do when you want to retire if you decide to trash your credit and start renting now?
OP, please take a look at what aspects of being in the house are causing you the most grief. If it’s just the financial burden then you have been given good advise and a good financial planner is in order.
I would guess that most home owners find the situation tolerable unless there are other factors. Perhaps looking for other ways address your issues may be fruitful. I’ve been terribly upside down in a mortgage and, although not a pleasant situation, give me the level of stress you have.
It’s a secured loan. The OP’s obligation is to pay the mortgage *or *turn over the underlying collateral. He is living up to his side of the bargain. Banks and other commercial enterprises do the same thing all the time; look up efficient breach.
Now, if the OP’s plan was to stop paying the mortgage and stay in the house through years of foreclosure litigation, I would agree with you.
This is based on a friend I know, so it might not apply to the OP. Is the house really the problem, or is it something else? My friend is one of those people who is often unhappy, and one of the things he blames is where he lives, so it seems like he always wants to move. Fortunately he earns enough to do this, but he would be in far better financial shape if he wasn’t buying and selling his house every 3-5 years. For my friend, it’s not so much the house that is the problem, as much as untreated anxiety and depression, so the neighbor with a loud car irritates him, and he thinks moving will solve all his problems. Wash rinse and repeat.
Another option for the OP, is outsource the upkeep and other issues that are bothersome. Sure, it will cost some money, but probably less in the long run than a foreclosure. Hire a yard service, find a handyman to take care of the small problems, and a contractor to take care of big ones. Finding the right people is hard, but there are even services to help with that. My dad is so much happier now that he made the mental adjustment that he is going to hire somebody to do the things around the house he used to do himself, but are now a physical burden.
Folks, read the OP. The issues are clearly stated there:
The bottom line is that the OP is no longer wants to be responsible for maintenance on a house and yard. The desire is probably exacerbated by the fact that he is upside down in the house, value-wise. He has repeatedly said, however, that the issue is not his ability to make the monthly payment.
The expenses, including property taxes, the OP will still be paying in an apartment. The landlord will have set rent at an amount that will enable him to recoup monies spent on taxes and upkeep AND turn a profit. The difference is that, when one is a homeowner those expenses are paid when incurred while as a renter a bit of each monthly payment goes toward maintenance and taxes. The only thing that will work to the OP’s benefit is the fact that he and his wife won’t physically have to do the yard and home maintenance work.
Given that, why don’t you just hire a lawn company to keep the yard minimally decent and pay a professional to do household maintenance when required? The only possible way to financially “win” in this situation is to stay in the house until either the mortgage is paid down or the market swings back up.