Oh - if you do a short sale and the lender writes off the difference (vs. saying you owe it), that’s treated as income to you.
Now, income tax on 60,000 bucks (or whatever) is certainly less than having to pay the whole 60,000 dollars, but it’s still considerable.
Opinion threads belong in IMHO, not General Questions. Moved.
samclem, Moderator
Just what I was going to say. When Tom Scud and I were shacking up and both working, we saved pretty much half our income toward the wedding and down payment.
Or a combination - you shack up with the fiancee somewhere other, and presumably much cheaper, than your house (where is she living?), and rent out your house.
A couple more things…
I really love her family and they are in a different state, so may want to move to be near them when we have kids.
Also, I had a heart attack a couple years ago and generally am not fond of stress. I wish there was a “help stressed out middle aged white guys” fund to help with this kind of thing. Kinda makes it hard to enjoy life. Boo hoo.
On the bright side, when I can manage to stop worrying and just “live for now” we do have it pretty good.
She’s living with me.
I have my doubts that we’d be able to save much by renting out the house and moving to an apartment.
She’s paying $650/month now, which is cool, but when we combine incomes I’d rather we pay off her college and medical debts, which are around $25k. She’s in sales but she wants to go into personal training / group fitness part time. I have no idea how much she’ll earn doing this but she is a very smart hardworking girl.
Also, I kinda want to quit my soul sucking cubicle drone job.
Yes, but the soul-sucking job is earning you a pretty good salary. Can you do better salary-wise elsewhere?
Rent out your house while living in it. If it’s that expensive of a house, surely you have a few bedrooms to spare. You don’t have to take on “riffraff” if that’s a concern. You can have potential roommates pay a small fee, which you use to conduct a background check and an employment check. Only take on single professionals who’ve been employed at one place for at least a couple years, with no criminal background. I bet it’d be a pretty good arrangement.
Depending on the part of town you live in and how many spare bedrooms you have, you could get anywhere from half to all of your mortgage paid by your tenants every month (of course your other bills will increase). And you can put conditions in your lease to protect your family and your home investment… no overnight visitors ever, all visitors must be pre-approved by you, use of the kitchen limited to certain times of the day, no parties, no pets, no liquor, no smoking, very limited use of public space except for coming and going, etc etc. The more rules you add, the less you can get away with charging for rent, but it’s still income. Think about it. I’ve been renting from homeowners for the last couple years of my life (one was even a complete family with 2 kids), and it ends up a beneficial symbiotic arrangement with the right people and rules.
Nobody WANTS to rent out their home to strangers. But it’s probably a really good option to look into. It would really suck for you to start out your marriage with a bankruptcy, you know? And although you may not have known when you signed the closing paperwork what you were getting into (none of us can read the future), you DID sign up for this. You haven’t lost your job or anything like that… just suck it up and do what you have to, to at least get out from underwater.
I’ve always heard that it should be around 25% of gross income, not net. So it’s a little better. Not much, but a little.
My wife graduated in 1968 and taught school for 3 years, paying off our student loans and building a nest egg. We could then make a nice down payment on a house for her to be a stay at home mother. No we didn’t have as nice of a car as many people do, but no regrets.
Note. We came into some money in early 2000. Nobody has tried to tell me we blew it paying off our 8 1/2% morgage before Bill’s tech wreck.
What state are you in ? What kind of housing would you move into if you walked away from the loan ?
Don’t worry about any moral obligations - this is strictly a business decision, the same kind a corporation would make. You have to take 2 things into account:
You take those two things into consideration, and were I you I would do one of the following:
In a state without deficiency judgements, where I could get housing for hundreds or a thousand+ less, I would pack up a moving truck, mail the keys to the bank and stop paying the mortgage. Make sure to scrimp and save, because the credit hit you take means you are going to be paying cash for things like cars, etc for the next few years until your credit recovers.
In a state with deficiency judgements, I would either work towards a short sale with the bank or do nothing - it sounds like you have too much income and assets to walk away + declare bankruptcy, so your wages would probably eventually end up garnished or your assets seized for the deficiency judgement.
What I don’t understand is why you bought the house in the first place. You said your income at the time was 80K and it cost 535K. So you bought a house costing about seven times your annual income. The usual advice is no more than two or three times income. Were you expecting to see a sharp rise in income?
Funny - I had missed this column that came out just a couple of weeks ago by Washington Post columnist Michelle Singletary, discussing the effect of short sales etc. on credit score.
Exactly. Why on earth did you buy this house?
Note that, other than the house purchase, you’re doing OK. Five years ago, you earned 80K and now earn 25% more. That’s more of an increase than many people have seen in the past five years, and 100K is good money.
This is also a huge reason why I think you should not EVER EVER touch the retirement funds. Everyone makes bad financial choices, and I think you’d need a safety net.
I say - stay in the house, pay the mortgage, and live like moles for the next 5 years. Sell everything you can, including downgrading your car, non essential electronics, etc. Give up on the hope of a grand and wonderful wedding for now.
IMO, if you have the discipline, you can pay off the house in five years. Then, you’ll have excellent credit, a paid for house, and $2500 a month in disposable income. Five years may seem like a long time, but it will pass, and at the end, you’ll be unbelievably happy and stress free.
Mathematically impossible unless they give up eating, paying taxes, buying ANY clothing etc. - with a mortgage of 485,000, that’s 97,000 a year just in principal.
Leaving 3,000 a year for other stuff. OK, plus what the fiancee is bringing in but that is probably not enough to cover all the other expenses.
Aside from that, yeah - live frugally, small wedding, avoid all unnecessary expenses, get the place (and other debts) as paid-down as possible while the modification is in place. Then in 2-3 years, you’ll be in a much better position to move or perhaps refinance. I’d bet the two of you can knock out your fiancee’s medical / student loans in less than 2 years.
Irrelevant why the OP bought the house in the first place - while it doesn’t sound financially correct, that doesn’t matter at this point and it’s unnecessary and judgmental right now.