Young and Upside Down on the Mortgage: What Would You Do?
Embattled real estate markets and soaring foreclosures aren’t just affecting middle-aged Americans; there are plenty of young people who bought early at the wrong time. True, young homeowners have less invested in a home and plenty of time to rebuild their finances, but finding yourself staring down the barrel of foreclosure is unpleasant at any age. I want to share an email I received from one such homeowner, and ask: What do you recommend he and other upside-down homeowners do?
A 26-year old reader from Florida wrote me and said:
I bought a home at the peak of the market three years ago and am now nearly 50% upside down. To make matters worse, I live in Florida where our real estate markets are being hit extremely hard. Since the banks are being “stingy” with refinancing loans and I don’t qualify for Obama’s plan, I’m convinced that a planned foreclosure or short-sale are my only options. Obviously, I’ll ruin my perfect credit that I’ve been building for nine years.
The mortgage is less than 31% of my gross monthly income, I am not behind on payments, but I am still young enough to rent for the next five years before I consider buying another place in a better market.
What are your thoughts? This reader is fortunate enough to be able to keep making payments; the question is: Does it even make sense? I’m not so sure. Even if the Florida real estate market rebounds, it will take a long time for it to rebound enough so that he could sell the home without taking a loss.
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Should he walk away? Money ran an article in its May issue asking: “Is it ever a good idea to ‘walk away’ from a mortgage”? The answer is a surprising “maybe”. Yes, your FICO score will drop 100 points or more, and the foreclosure will stay on your credit report for seven years. It will probably be at least that long before you could buy again. And although your credit report may come into play with landlords and prospective employers, a lot of people are going to be more sympathetic about your situation now that we are, as Money put it, “Foreclosure Nation”.
What about taxes? Once upon a time, there were tax consequences to walking away from a home: Uncle Sam would tax you on the unpaid mortgage balance as if it were income. Those taxes have been repealed as long as the property is your primary residence (walk away from an investment property, and you’ll still owe).
Is it ethical? Of course, there is also the ethical dilemma of whether it is OK to walk away from a home. That one, however, is purely personal. I imagine that for everyone who says it’s absolutely not okay ethically to walk away from a debt, there are others who can aptly argue that the banks took these risks and are now simply paying the price.
What would you recommend? Do you think this reader should stay put and suck up the sunk value of his home, try to short-sell, or just walk away? Let us know in a comment.
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There are some circumstances in which it may be better to leave a mortgage. In this circumstance he should keep paying the mortgage. He can still afford to pay it and it doesn’t sound like he wants to move anywhere soon. So why not keep paying it, a debt he agreed to take on? Plus, he will have his home to live in where he can do what he wants. The only way that counts as a loss is if he decides to sell it at a loss.
I agree with the above commenter; there are plenty of reasons why he would let it go to foreclosure, but in this particular situation he should keep paying the mortgage. If he couldn’t afford it or needed to move, he should walk away. And it’s true that he may be looking at a situation where–no matter what–he may never see any appreciation on the house, and in fact may still owe money if he tries to sell a few years down the road. But how is that any different or worse than what he’d get renting? What is the benefit to going to a planned foreclosure here? I don’t see the urgency; hang on and hope for an improvement in a couple of years, and wait and see if you can avoid foreclosure.
I live in south florida and am in the exactly same position. My husband and I bought our home shortly after getting married at the peak of everything. Our property is now worht 40% less than what we paid. However we do not qualify for any help since we can afford the payments. I hate that I paid more than it is worth but that is the risk with real estate. I have a contract telling the bank I will pay, so I will. (Unless we lose our jobs or something.) I would feel it is wrong to just let it foreclose. I would also hate to ruin my credit. I wouldn’t do it.
Hi all. Thanks for the responses above; I’m the 26-year old Floridian. The reason that I’m ‘urgently’ considering walking away is that as you mentioned, I may never see the property appreciate and every month that I pay this mortgage is another month of losses. Let me add that in the current market that I live in, I can easily rent the same condo with equal amenities for half of my monthly mortgage. My rent would be less than the interests that I pay each month. At this time (as per my projections), the tax benefits of owning a home is negligible as it does not place me in a lower bracket. An the bottomline is that seeing what is out there, I am ready to upgrade and move to a larger place (again, which is significantly cheaper to rent).
This property that I own isn’t exactly my ideal “home”, rather it is a condo near the beach which I bought to stay in for 4-6 years but I did not expect for it to drop in value as dramatically as it did, given it’s location. Additionally, I’ve been paying 10’s of thousands in property assessments over the years that has made me a slave to it (no dream vacations since I entered the job market nearly 4 years ago). I just can’t find any good reason to justify staying.
At this point I’m confident that walking away will payoff in the short and long road, but it is still a scary move to make. As far as the ethical viewpoints, please spare them as this is strictly a business move to secure my financial stability of my 30’s and improve my quality of life during the remainder of my 20’s. I have no considerations for the “responsibility to the loan” argument.
Moving forward, has anyone been through this process of intentionally foreclosing? Any advice on making this a smooth process? Are there any considerations that I may have missed? As David mentioned, in 2009, Uncle Sam is pardoning the unpaid loan balance tax so that adds to the urgency. On a plus side, I can live rent free for approximately 8 months which will allow me to payoff my car quicker.
I am in a similar situation here in Nevada. I’m about 30-40% percent upside-down and have been looking for solutions. I don’t qualify for government bailout either since my financial situation hasn’t changed, but perhaps in the future (if the government decides they REALLY want to help), there will be modification programs where they’ll adjust the principal on the mortgage. I think this would be the only way to really help the most people.
My house owns me. I can’t move. I can’t sell. I can’t even break even renting it out. It’s a horrible feeling.
I have a retirement account at work that could almost cover the loss. If I went in to foreclosure, could the bank go after that money? Does one need to essentially declare bankruptcy to foreclose?
Grant,
I’m fairly sure that the bank can go after your assests. While I’m no financial guru, I understand that a mortgage is strictly an asset-backed loan that is solely tied to the property that was purchased which is why you lose your home when you go in default.
Sorry, I meant “can not” go after your assets.
I think it is incredibly foolish just to let a foreclosure happen if you still have an income that can support the cost. I am facing a similar dilemma (althought I am fortunate to have about 15% equity, not the original 20%, but I’m above water). I couldn’t refinance on terms I found favorable, despite a credit score of 779. This is mainly because most of my cash is in mutual funds (more than the equity in my home) which took a big hit. Rather than take a loss on the mutual funds, I am just paying off principle to lower my principle and future interest payments, thus boosting equity. Hopefully, I will be able to refinance in the not too distant future and rates will not have crept up too much (they have gone down since I gave up looking). If not, I will have reduced my monthly payments a little.
I should also add that I am taking my course of action because I live in a part of a major city that saw an increase in home sale prices, despite huge falls elsewhere. I figure if the market was bad last year, but managed to edge up, that is probably a good sign for the future. It may not make sense to pay off principle if your home is going to lose value.
I find that to be terribly unethical! Sorry I can’t “spare the ethical comments,” because it disgusts me. So many people in our nation are in the situation, and if all those people bailed on their mortgages, banks would be failing left and right. In which case, the government would be shelling out more money to bail out banks with our tax dollars for years and years to come. Way to pass the buck on your poor investment! I hope they establish laws so selfish people like you who can afford their mortgage cannot get out of it.
I really hope a bank never feels like they are “responsible to lend” people like this money. If I was giving people loans and someone they told me that they didn’t feel responsible to pay back the loan I gave them, they wouldn’t qualify. When are people going to realize that their seemingly small actions effect the nation? How big of a financial crisis do we need to have in order to get that through our heads?
Diego, I live in South Florida as well.
Unfortunately, you were misinformed about the bank not being able to go after your assets. In Florida, the mortgage is a recourse loan and the bank could very well decide to go after your assets. I’ve had a few friends in the same pickle and a couple were forced to declare BK in order to intentionally foreclose. These people were in a world of hurt due to the ARM adjusting, so their backs were against the wall. I would NOT walk away in your situation – you will destroy your credit and the bank may sue you for the deficiency if it believes you have assets. Believe me, I am tempted as well – my townhome purchased two years ago is valued around $165,000, mortgage is for $250,000. I can still afford the payments so it is impossible to have the bank modify the loan. The neighborhood is on the decline and now riddled with foreclosures and renters, and my boyfriend and I want out. Our only option is to rent the townhouse at a loss, and purchase a cheap deal in a better neighborhood with decent schools, getting in on a foreclosure at the bottom of the market while carrying the townhome until it is “rightside up” (could be years!!!)
I am in the same decision here in S FL. I think the banks and lenders that helped us get these loans are at fault. I think the government is also as fault for not helping reduce the principal of our homes. What do they expect us to do? They are only helping people that can’t afford their loans and not the hardworking responsible people that continue to pay. I think it is a terrible way to reward hard working americans who got caught up in a bad situation.
For now, I am continuing to pay my bills. Although the thought of walking away is very tempting. I am young, in my 20’s and am getting married soon. We want a bigger place with room to have a family and are trapped with my tiny condo. For everyone that says we are not responsible for thinking of walking away, you have no idea what it is like to be trapped with a property that has depreciated in value by $100 thousand dollars. When you pay into the principal it’s like throwing money in the trash. I say, go to youwalkaway.com and they will help you through it. Best of luck.
Diego, SS, and others,
Take some responsibility for your actions. People like you are making this financial situation worse. Granted there are some predatory lenders that are at fault, but I doubt that is your case.
You have a contractual obligation to pay your mortgage. If people don’t, then others through out the country lose their jobs, not just at banks but all across the world in all sorts of industries. How could you be so unbelievably selfish and irresponsible to suggest it is okay to walk away?
People need to stop blaming the government and start taking responsibility. Yes, some irresponsible bureaucrats made reckless decisions, that doesn’t mean that any of us should. I don’t think it is asking people too much to live up to their obligations. If you suffered a loss, learn from your mistake. That’s what all the successful investors do.
SS, before walking away please note that in Florida the lender CAN take you to court for a deficiency judgment. I am also in the same posture in my life – looking at marriage and family, yet trapped in a home that is not suitable longterm. The solution? Not to walk, but to rent the home out and cover the difference between the mortgage and costs, and the monthly rent I will get until I am rightside up. It is not ideal at all, but I am not going to harm my credit and live with a foreclosure on my record unless I absolutely cannot afford to hold on to the house. Fortunately, the kind of deals you can get on a foreclosure make it more than possible to do this. You can find a foreclosed sf home in a decent community with good schools (not Weston or Parkland, but a respectable safe area like Plantation ) for $210,000 or less. With two decent incomes you can rent the condo and handle any monthly deficiency. Get an accountant – claim the operating loss and mortgage interest deduction and it may not be too bad!
Matt, it is easy to say that it is our fault, but there are plenty of people like myself and my friends who were perfectly responsible (10 to 20 percent downpayment, fixed rate, we bought in our means but at the peak of an inflated market based on the appraised value at the time). I do think that a principle reduction of some type is reasonable, or refinancing for those of us more than 105 % underwater.
Regarding the ethics of walking away, I have never paid a late bill in my life, live within my means, have a credit score in the 800’s, and though I cannot believe I am actually saying this, I am walking away. My husbands job moved to another state, but our home, bought in 2005, fixed rate, is down $100K in value, not even close to being rentable at a price to cover the mortgage. We were fortunate to have a guaranteed cash buy-out offer as part of my husband’s relocation benefit, however only at FMV which meant a short sale. We spent 8 months apart and thousands in continuing the mortgage, and a couple thousand more on repairs/inspections to get the offer on the table. We began working with the lender fall of 08, however in the end (May of 09), all of our efforts meant absolutely nothing because the lender spent so many months “processing” the offer, it finally expired. We tried daily to get it through but could not get complete answers, information, directions, or even hardly returns to our calls/emails. Absolutely no regard was given to the fact we spent a ton of time and money to avoid foreclosure. So now have no choice but to walk, however, I no longer question those who see this coming and choose to walk away in advance. Had we done the same, we would be $20K ahead and probably be almost done with foreclosure process and moving on. Putting everything on the line to avoid foreclosure was not the smarter financial route, and ethically, it made no difference whatsoever to the lender.
We are over 50 years old, not under 30, but it is the same for us in some respects. The fact is we need to live somewhere and as we make each mortgage payment the loan principal is reduced. Fortunatly, we do not need to realize the current paper loss.
We are both working and there is not much to invest in now …so we are paying down our debt instead. The 401K’s are not in the stock market and we consider the employers match (we still have that, for now) as our “yield”. I know….silly isn’t it…but there is nothing safe to invest in anymore that yields anything.
The world seems to be getting harder and harder for younger folks to survive in…and the recent political commitments seem daunting to us for future generations….
Michael & Marlene
Same boat. My husband’s section at work is closing so he had to find employment before we did foreclose on our home. We are down $100k and paying a mortgage on this home throwing our money away. He has had to accept employment in another state. Faced with our 2 young daughters living without their father and me without a husband until we can unload this house. We can rent at $1200/month below our mortgage payment. My husband holds a tope secret security clearance and cannot take a beating on his credit report…or he will lose his job. It is not fair at all, but we live without my husband now while we are responsible and doing the right thing. We will rent at a loss if we should find a decent person to rent to; however, we will have to pay their HOA fees and so forth and take a bigger loss. We will have to rent close to him and try to make it work…Everyone is in the same boat…Allowing a foreclosure will worsen our economy because everyone is here with you. I am not saying it is fair or even right. I think you should do what you feel is best for your situation because there is no “right” answer. This just “sucks.”
If you can afford to pay your mortgage and have not had a pay cut i say stay there to ride it out for awhile. You will have to pay rent anyway. I am in the same situation that this guy and also live in Florida and have perfect credit that i worked hard to keep. It is the banks and Government are not doing anything to help us out which in my opinion i think that their of course should be rules but if you brought in the prime market they should be re-adjusting your mortgage to what your house is worth now. I mean come on you go in foreclosure and they are selling these places for $100,000 or more less then what we paid for. What is the difference in working with the owners now? Greed !!! I brought my place for $200,000 and they are selling for $60,000 !! We are not getting help and greed is what got us in this place and greed is living on thru the Government and the banks !! I was laid off and thankfully got another job but had to take a dramatic pay cut now i cannot afford my place. It is sad but they don’t care about anyone other them themselves. Yes the bank can do a deficiency judgment just like the other comment i read but then you would have to go bankrupt !! The nightmare does not end and unfortunately they are not making this easy for people in such a bad time. For the comment Sara made i say to her get a life !! You have no idea what you are talking about. The banks gave out loans that people did not have to qualify for !! HELLO THEY HAD JOBS AND COULD PAY !! People are getting laid off left and right so with your ignorant opinions SARA try to think before you right because you sound stupid !!
Sheri,
First of all, you sound very educated and mature.
To clarify, because I’m not sure you understood what I was talking about in my post, I was referring to people who CAN afford to pay their mortgages, and are CHOOSING to walk away from them- with no sense of personal responsibility whatsoever (like the person in the original post). I believe this because if the government does bail out people who are in foreclosure, it is my tax dollars (and probably my childrens!) And, I don’t feel like I should have to pay for someone’s problem when they can afford to pay for it themselves.
Second of all, if a bank gave you a loan you did not qualify for, it is the fault of both parties. There is definite predatory lending out there, but I think people needed to take personal responsibility too. My husband and I were approved a $400,000 mortgage, and I basically laughed in the lender’s face- because there was no WAY we could truly afford that! I think some people just went along with what banks told them they could afford, without even looking at their true budget or anything, and I really do not have much sympathy for those people – its not rocket science! It’s elementary math – Income minus expenses! (Although I admit, I may be naive to how clueless people are when managing money – common sense is not always common! And- some people may have known, but were just greedy and went ahead with the loan anyway!) I’m certainly not saying banks are completely innocent, and they certaintly deserve some of the hit – but in my OPINION, they deserve the hit from people who really couldn’t afford their mortgages, not the people who can afford their mortgages and are walking away.
The reason being, there is no insurance policy on the economy! The the value of a person’s house is not guaranteed to rise, or even to stay the same – no more than an investment in the stock market. As a country, we have been so fortunate to see home values rise – if not skyrocket – over our lifetimes, but that does not mean we are entitled to it and deserve to be free from the risk of an investment that did not go as we planned. Especially when many people were not smart about their investments in the first place.
HOWEVER, I wholeheartedly agree there are people out there who did everything right, and ended up getting laid off and have HAD to foreclose on their houses; and have had no choice. I know many of these people and I know how hard it is for them to make ends meet. In those cases, it mostly just unfortunate timing or bad luck. These people, I definitely feel sympathy for – I just believe there is a huge difference between the two situations.
Walk away is simply a financial move. Mortgage for $240,000 and house worth $100,000. Monthly payment more than living in a house in a much better area and with a pool in the back.
The bad decision was to buy in 2005 like many other did. The punishment for walking away is simply the bad credit for 7 years; i believe this is punishment enough.
But again, is makes sense financially to walk away, live in a better place and save a few hundred dollars a month.
Besides. If you want to do the right thing, stay and keep paying; you are looking at probably 15-20 years (assuming your house value increases by 7% / year) to make the equity back on your house.
Are you ready to spend the next 20 years paying for something that is not worth what you owe?
I’d sure like to weigh in on this discussion to express my thoughts on how things are unfolding with these upside-down mortgages.
Situation #1
Yes, there are those who engaged in the game of flipping and were caught with upside down mortgages and are now paying the price. There are also those who bought too much house for their budget and got brought down by the Taxes and rising costs. However, there are traditional investors that put their money into the RE market banking on long-term investments to secure their future and they are also paying one heck of a price for calculated risk. In this situation one must, of course, weigh in the balances the ups and downs of the RE market which is perfectly healthy. However, what has happened here in the US is that anyone investing here since early 2004 has seen any chances of even breaking even swept away for many decades and maybe even permanently.
Why is this the case? Financial institutions have been given carte blanche to do as they please with our deposits and “creative” financing and have caused, not only the collapse of RE, but of the entire Financial system. This has been REAL Voodoo economics at it’s best. Their cavalier attitudes toward managing the Financial well-being of this Country has resulted in this disaster and, yes, they have been bailed out, in some cases twice! Why???? Where is the help for the consumer (investor)? Nowhere! The investors mentioned above did not have to invest their life savings in our Country to boost our economy but they did. They could have gone somewhere else.
The irresponsible notion that I have heard from so many Politicians and others this year that “RE investors are some kind of demonic entities” is pure rubbish! Investing in Real estate has a positive ripple effect on entire communities as anyone with a shred of economic education fully well understands. Lenders should be held accountable for sucking in unsuspecting investors with predatory lending practices. These are the same demons that are sending your 16 year old Credit Card offers in the mail that are laden with traps that they are currently unaware of. I am entirely against the suggestion that investors are bad people. If these Banks and large Corporations are the Engines that drive the economy as some in high positions have suggested do not forget that WE (consumer/investor) are the Oil that runs that Engine. To simply write off the Consumer is insane and the Economy will NEVER recover without oil in the engine.
Situation #2
I have an Associate who bought a 1 Bedroom, 1 Bath Condo in Miami in 2004, actually downgrading from a 2Br, 1Ba that he had sold in California that same year. He bought the 1Br because he was single and it suited the needs for one person, paying $100,000 less than he sold the condo in CA for. By definition, this could not have been considered an investment as he would either have moved upscale with his equity or bought two for the price of one.
This 1Br was his home for three years. He then got married to a Lady with one child in 2007. Obviously, the 700 sq ft. 1Br was insufficient for 3 people therefore he investigated the possibility of selling it and buying a larger unit. Unfortunately, the Property was now worth half the mortgage so he was unable to sell. Alternatively, it was necessary for him to rent a home. Due to the terms of a second mortgage on the Condo he was not technically allowed to rent the 1BR out, therefore, he was stuck with a monthly rent payment plus servicing a value-less mortgage and inflated Taxes based on the mortgage not the value of the home. What to do? Prior to depleting all of his savings toward the end of 2008 he reached out to the Lender for assistance via a “Loan Modification”. One would think that with all the bailing out going on with Lenders and the like, that this guy could get some help. He didn’t and so was unable to continue paying the mortgage. Now, his credit has been destroyed and he is looking at foreclosure since the Lender is dragging their feet, providing (frankly) the most embarrassing excuses, mixing up the paperwork of different Mortgage holders and generally acting like Abbott and Costello. Again, he feels that he is being treated like a Demonic investor who is getting what he deserved for buying the place in the first place and has no representation in the “System”. What do people like this do especially when seeing real criminals, the Banks, get bailed out? I personally believe that the Banks (Lenders) should be held accountable in this entire process. Banks should be bailed out ONLY on the condition that every one of their Clients be given fair and equitable solutions to the problems that Lenders created in the FIRST PLACE.
We’re not looking to avoid paying mortgages, we just need to see the values of those mortgages adjusted to reflect the new worth brought on by a RE collapse caused by these very Lenders. As Joe Consumer, I will NEVER have faith in this Country’s Banking system again. I’ve seen the pattern of unethical behavior demonstrated since the 80’s with the S&L debacle and it simply has taken a new shape in some other sector as time goes by. I’ll find some place to lock my money away so that I can invest abroad in Real Estate some day in the future, never here! There are way too many thieves in high places in this country making billions through real uncalculated risk taking. Nobody does anything but slap their hands while they have their billions well protected. I have nothing against wealthy people only those that stole other people’s hard earned money.
Long live the economy nurturing Investor and those who simply seek the American Dream!
We are upside down on our mortgage but can afford to pay. Just like the person that started this thread, the reason we can pay is because we are not extravagant and have not decorated and equipped the house like we would have loved, no dream vacations, home cooked meals everyday – aka living within our means or being responsible. But I can’t help noticing the quality of these foreclosed homes. These folks lived it up! And probably continue to to do as they would abandon the homes and rent another well decked home somewhere else and still continue to live bloated lives.
What hacks me off is that our Government is enabling such practices by extending help to such. There is no help for us because we can afford to pay our mortgage – no credit to some of the sacrifices that we have to make daily in order to continue to afford our monthly payments!
I think the banks, government need to take a long hard look at those who are trully committed to upholding the economy and ethics by paying their mortgages despite the loss of equity and communicate a big THANK YOU! Extend a temporary 3-5yr loan modification for ALL on record without them having to call and submit all kinds of paperwork and proof of this or that. If they did that on their own, this will go a long way to appease those that are at the verge of walking away.
We can still salvage whatever is left of this great economy.
i couldn’t agree with you more! i am in the exact same situation. we bought responsibly, in a neighborhood that wasn’t our first choice, but it is where we could afford. had we bought more than we could afford, we’d be getting bailed out right now. i’m walking. i’ve had enough and i am not going to sink my family’s financial future on one horrendous condo that was supposed to be a “wise” investment. turns out it wasn’t wise, so like any good bank or financial institution, i am going to mitigate my losses and walk. i’ve gotten over the moral obligation in this mess.
I live in SWFL as well – condo MIGHT be worth $75k and we paid $250 in Jan 2005. After sticking my head in the sand for a long time, I’ve decided it is better in the long run to have bad credit and cash in the bank. If we rented for 5 years, we would easily have $50k in the bank (or under the mattress!) rather than throwing it into a black hole. Can we afford to stay? Yes. Ethically, should we stay? Maybe… but long term, it is NOT what is best for our family. To all the people saying that people in upsidedown mortgages should stick it out no matter what – you’re not in our situation are you?? Easy to pass judgment when you’re not paying through the nose for a losing investment. Goodbye 2B, 2B… I’ve already lost enough on you!
I would be happy to sell my home for a loss of over $100K but are lenders willing to help someone with a high income and reasonable credit score do this? How do I find this information? We cannot stay in our home because my husband’s contract ended and he has relocated.
Speaking strictly financial terms and not ethics, in a lot of cases it does not make sense to continue to hold onto a house that is extremely over leveraged. Attempt to do a mortgage modification with your lender, to be fair to the lender. the truth is that the loan modifications are a joke. they don’t approve 99 percent of the people and when they do, it is taking missed payments and adding them to the normal payment making it even harder to pay. To be clear… because no one has completely got it right… if the house is your primary residence the TAX BURDEN from the loss (if the lender decides to 1099 you) will not effect you. Understand that your 2nd mortgage (if u have one) can still choose to go after you for their loss. Foreclosure is last choice. i suggest you do a short sale. They are sloooooow and annoying but it will have a significantly less negative effect on your credit than a foreclosure. If the person that is buying the house has a lot of experience negotiating with lenders they will have a much greater chance of success than your typical real estate agent who has done a couple. I know how bad the FL market is right now because i have been buying down there (vegas, az, oh, ca, mi r bad also). FYI the 2nd mortgage still can attempt to recoup its loss in a short sale but it would be no different than a foreclosure. If they do you can attempt to negotiate the balance down or file bankruptcy. In some cases the lender will not attempt to get the loss from you. If the person doing the negotiating knows what they are doing, they will 1st attempt to include in the negotiations to have the lender not only release the lien but to also consider the debt satisfied. ultimately its up to the lender but its much better then holding onto a house for 15-20 years and still not catching up to what’s owed. that is a terrible investment and its only a matter of time before you want/need to sell and will have to sell it at a loss anyways. get it done now and move on with your life. if you have any questions about the process let me know i would be happy to help. I was an agent and now i am just buying houses in similar situations. Good luck.
we are walking. our condo in san diego is $180K under and it doesn’t make sense to stay from a financial perspective. sure we have a sense of moral obligation to fulfill our debts, but the bottom line is we signed a financial contract that has very specific language in it providing an out clause. if we want out of the deal, we have to give back the house. ok, here you go chase, take it. i also read that morgan stanley recently gave back 5 large office buildings in san francisco. they certainly felt no moral obligation to fulfill that debt…they were looking out for their best FINANCIAL interest. they either maximize profits or minimize liabilities. i’ve called the bank countless times and i get the same response, “we can’t help you, let alone talk to you unless you have missed payments.” the banks play on our “moral” obligation to their advantage. they took risk in this contract by loaning me money to buy an extremely overinflated property. i own my half, and i will fulfill it by returning the condo and taking the credit hit. the banks are not playing by the same moral rules that homeowners are and they are as culpable, if not more so than the average joe in this mess. walk people, walk! maybe if enough people walk the banks will be forced to change their ways. heck, they were bailed out with MY tax money, so i don’t feel the least bit sorry for them.
We can afford it, but walking in Phoenix. This was a bank generated problem and now I am being asked to pay for their greed. Please
I live in Central Florida. We bought a home well within our means in 2001 – long before the crisis. However, my husband was laid off – started his own business and has seen his income drop to about 1/3 of what it was. We refinnced and paid off all our debts in 2004. We didn’t go anywhere near the full value (hyperinflated) we could have. However, my home is now worth less than what I paid in 2001. Not only that, the builder (who went bankrupt) did a poor job and a house that is 10 years old has had 2 showers collapse from poor work, cracks in the foundation, and the roof and rafters need to be replaced for shoddy work. I did have a home inspection, but it didn’t catch any of this. So I am below the level of what my house was worth 9 years ago. It will probably take 30k to fix the issues – and of course I can not get a loan to do so. I have defaulted on medical bills in order to still pay the mortgage. I drive a car with over 125k miles on it.
Why are we in this situation? Well, the people who shouldn’t have gotten the loans in the first place have already defaulted. Then there was the flipping. Own for a month make 50k profit. We also had fraud here – where the mortgage companies artificially inflated the value which drove up the surrounding market values for the “responsible” people. I have struggled with this decision…but I cannot see continuing to struggle to pay a mortgage on a property that will continue to decline, will not apreciate, can’t be a short-sell because of the condition, and the crash of the market was caused by the government’s irresponsible policy’s and they are bailing out the top dogs with very little trickle down to those at the bottom. When it’s time for me to retire, do you think the CEO of CitiBank is going to help pay for my nursing home? I don’t think so!
We live in central florida and are over 120,000 upside down plus alot of dept. Everybody’s situation is different and we have decided to short sale the house. Morals or not, it is definitly the best option for us, acturally our only. It’s business. I’ve got three children to think about. My wife has worked around the clock the last few years to pay for this house and it can’t continue. Her pay has gone down. So has mine a little. We make our payments, but just barely. I also work non stop. We will be better off in a rented house so we can pay off our depts and stop being a slave to it. We can rent something for way less then our current morgage. I’m getting closer to 50 and I will never have retirement money if I stay here. WE WILL NEVER IN OUR LIFE TIME BE ABLE TO HAVE MONEY FOR ANYTHING WITH THE 120,000 WE OWE EXTRA ON THE HOUSE….PLUS THE INTEREST THAT GOES WITH IT, and the high morgage..