I have a home that I shared with another and now left to take care of alone. Long drive from work and too much property for a single female working two jobs to take care of on her own. I owe more than it is worth and have not been able to sell for what I need. (meaning walk away not broke) I can either stop paying my mortgage and try to short sell or foreclose if it goes that bad or try to lease it out and see if the market picks up later. Not sure which one is best. One destroys my lovely credit the other may cause more issues and cost than I can afford. Any thoughts from those facing the same decisions?
Moved from General Questions (which is for question for factual answers) to IMHO, which is the best place to get advice and opinions.
What is the total amount of the mortage, your monthly payments, the actual value of the house, and how much money do you make a year? From the tone of your OP short sell sounds like a good idea, if it’s feasible. If you are young, bankruptcy isn’t a terrible idea. Unless you can lease it for more than your monthly mortgage payments, that probably won’t help.
Total mortage is 158,000, monthly payments 1500 actual value of home 140 down from 169. I make about 55k a year with both of my jobs.
Also just got sent this artical on Bank of America loan forgiveness.
http://finance.yahoo.com/news/bank-america-starts-mortgage-reduction-100202589.html
Ridiculous that if you work hard and pay your due that those that don’t get all the breaks.
Where do you live, and how old are you (if you don’t mind me asking)?
You’d have to total up your total costs to consider leasing. The mortagage payment, tax payments, insurance (which may go up if you lease), the management costs (which may be minor if you do it yourself), plus expected cost of having no tenant at some times, and possibly the cost of evicting someone. You’ll maintain the mortagage interest deduction, so that’s an advantage to consider. But it sounds like you might need to charge nearly $2000 a month for a lease and still keep yourself protected. Or if you can absorb some loss, lease it for less and risk a much smaller amount on keeping the house.
You’re 18K (a little more than 10%) under water, which isn’t that terrible. Depending on the time it takes the housing market to come back, you could be solid again in a few years, but then still have no equity. So sticking it out or leasing sound like viable (but maybe undesirable) options. If your credit is still good that’s a possibility to consider because you may make more money some day and could salvage everything at a small loss. The trouble is that you’re not accumulating any wealth this way. You’ll need a hefty down payment to purchase another house some day, and you won’t get that by spending on this one. I don’t know that many details about short sells, but your case isn’t a huge loss to the bank, and possibly you could work out a way to mitigate that. If your credit is good maybe you could secure a loan to cover the difference.
Good luck. I’d investigate the hell out of every option. Unfortunately the 18k difference between the mortgage and the value of the house may not be enough to qualify you for bankruptcy. If you don’t have other significant debts and can afford to make the payments you may not find much relief that way. Each state varies, but around here you need to have no hope of recovery before the courts intervene.
What’s your current interest rate, and have you tried to refi? $158K at 4% for 30 years would be a payment of about $750/mo, not including taxes.
StG
6.35% I looked into refi and it only saves me about $75 a month with a 4. something interest. Not really enough to make it worth the hassle.
You must be doing your math wrong because a 2% drop on your interest rate would be much more than a $75/mo savings. Problem is if you are way upside down banks may not refinance you.
Rent it out at market value, then stop paying the mortgage. It will take 12-18 months (or more) for the bank to foreclose. Pay off all your other debts with the proceeds and carefully invest the rest.
I was hearing on the news the other day that rentals are expensive and in demand - not sure if that’s the case in your area, but it’s worth taking to a rental agent about it. I’d look into renting it if it would be at least a break-even proposition, then find a small apartment. Eventually, you will no longer be upside-down, an you may find yourself in a position where you want your house again.
Personally, I’m sickened by the thought of walking away from a financial obligation when it’s not an absolute necessity. Yeah, it sucks that you’re upside-down, but you agreed to pay back the loan when you bought the place. I’m pretty sure your mortgage doesn’t include a clause that says you can back out if it gets too hard… (not you specifically - that’s a generic you) Anyway, IMHO the post by Emtar KronJonDerSohn displays an attitude that’s part of the cause of the economic mess much of the world is facing, and if it’s not illegal, it should be.
At one point in our life, we couldn’t afford our mortgage, so we rented out our house and lived on our old, paid-for boat - with a newborn - for a bit over a year. It was a hassle, but we didn’t have any other viable option. As it happened, the tenants bought the house from us, and we were able at that point to afford another, much cheaper house. No ding to our credit, no transferring our problems to anyone else. We just behaved like responsible adults and made the necessary sacrifices.
Plus, with being underwater, refinancing would be pretty tough.
Might you be able to swing a roommate? That would help with the expenses and maybe the upkeep, though it doesn’t solve the “long drive” problem.
Cubsfan (which btw I am too) The refi actually increases my mortgage insurance by $91 a month so it eats away what savings I got with the lower interest rate leaving only a $75 a month savings. Plus with a new job and little equity built up gets a little harder to get the lowest rate possible. I am a risk.
Fairychatmom I completely agree on the points you make. That is why I am having such an issue with this. I have applied for loan modifications, tried to work with mortgage company to approve a short sale and have been working diligently for 9 months to get a roommate. There is no help available for those that work hard to do the right thing. After seeing time and time again those that default getting all the benefits it gets frustrating. I work 2 jobs and have budgeted myself to the point where I only have and pay what I need. I am now to the point that in less than 10 months I will go broke and have to foreclose anyway. The thought of no home and no money is very scary for me.
What, exactly, should be illegal about this? It’s a mistake to attribute moral weights to financial decisions, *especially *concerning real estate. Companies who can afford to pay for the properties they finance foreclose intentionally all the time. It’s merely a business decision–the property became unprofitable or undesirable for whatever reason, and they didn’t want it anymore. The bank factors in the risk of default when they set the OP’s original interest rate; it’s not her fault if the bank miscalculated her risk, much less the multiple banks who miscalculated the loans of many others over the past decade.
It’s going to affect her credit rating going forward, so it’s not like a get-out-of-jail-free card.
In a very similar boat right now.
Owe 193 appraisal 2 years ago was 158. $1700 a month covers mortgage, PMI, Homeowners and Prop Taxes. Income is 80.
Company moved 30 miles over State line. Right now I can just scrape by but am staring at no savings for emergencies, expected repairs, or vehicle replacement. Top it off with UE benefits in the new state of employment being about 65% of my home state (field of employment is very cyclical at the moment and there is a looming potential for short term layoffs).
Options are to stop retirement contributions and/or stop medical insurance contributions. Or short sale, bankruptcy, deed in lieu?
Mortgage holder sends out many notices about assistance programs, but calls result in being told I don’t qualify unless I am 60 days delinquent.
Any experience with or thoughts regarding intentionally going 60 days delinquent? I could put the money in savings until or if I needed to catch up. Penalties would have to come from what meager savings I still have.
I am not desperate, but feeling really exposed financially should I have a major auto or home repair expense, or I get laid off for any period of time.
It takes four years for the poison to leach away from a foreclosure.
The first year, NOBODY will touch you.
After two years, the VA MIGHT consider you for a loan. Provided you qualfy for a VA loan.
Three years, store credit cards will be approved.
After four years, the foreclosure will roll off your credit report, and you can qualify for a decent rate of interest for a car loan.
The emotional scars last a helluva lot longer.
~VOW
I know someone who went through the government making homes affordable program and did get a reduction in her payments. She had to intentionally be 60 days delinquent to get into the program, she did it by making partial payments. I also think there’s a government program to help you get a short sale agreement with your bank.
Look here:http://www.makinghomeaffordable.gov/pages/default.aspx This is a very easy to use website with steps to guide you through knowing what your options are.
The lady I know who did it had a person in the state assigned to her to help her go through the steps. It all went pretty smoothly with only a few annoyances.
Thank you I will look into this for sure. It is not a decision I take lightly not paying and defaulting but my happiness in life is very much important to me.
Do NOT pay anyone a dime to help you with this, whatever decision you make!
There are a LOT of scammers who are preying on people in desperate need!
~VOW
Yes, that’s why I linked to the government site. There are a lot of questionable sites using similar wording to try to deceive people.