View Full Version : why keep the house?

2-16-11, 1:26am
i bought for 240,000. the mortgage balance is 220,000 with a 2nd that's a balloon due in 6 years for anywhere from 13,000 to 20,000 depending on the value of the house at payoff.
i got a divorce and got a personal loan for 25,000 to buy him out of the house.
i owe my retirement 7000.
my mortgage is half of my take home pay every month.
i'm paying 600/mo. for loans and child support.
not saving anything for the 2nd mtg balloon.
im not saving for retirement.
im living hand to mouth.
my car is 15 years old, i dont drink soda or buy chips or eat lunch out or buy clothes, etc. i know how to live YMOYL.

the house is worth 180,000 maybe 200,000.
why keep it? the math adds up to me being an indentured servant to a house until the market recovers enough to sell and break even; so what -5 years?
if i ditch the house i can pay my debts in two years max, go to school, and find work that doesn't suck the life out of me.

am i supposed to stay on the american dream treadmill just to keep my good credit score?

you say get a roomate? it's a 1000sf 2 bedroom, 1 1/2 bath and my kids still come to visit.

i tried living the american dream life and im over it; there just doesn't seem to be a graceful way out.

btw, it was the least expensive house in town.

iv thought about this situation a lot and just keep plodding along but im tired of the thoughts in my head. if you have something enlightening or creative to add please do. thanks.

2-16-11, 7:30am
If you sell the house, where will you (and sometimes kids) live? How much does that cost?
How old are they? How old are you?

I don't think that owning a house is everyones American dream. Besides, sounds like the bank owns it.

The Storyteller
2-16-11, 9:50am
Gee, that sounds tough. Why on earth did you buy him out of a house that is so upside down?

I know I know... 20/20 hindsight...

In any case, half your takehome pay for a house is just not sustainable. I don't know what the answer is, but staying in something like that is just not something that is going to work out long term. And I don't know the market is going to turn around all that quickly.

If you decide to get out of it, check to make sure you are in a state where they can't come after you for the difference. There are only a handful, but maybe you are lucky. TX and CA are two of them. I'll look for the rest and get back to you. That's the only advice I have for you, as I don't have the answers. Doesn't sound like you have any good choices in this deal.

BTW, is this a farm we are talking about, farmgrrl? Walking away from a house would be tough to do. Losing my farm would kill me.

Best of luck.

2-16-11, 9:57am
Yikes! Granted I don't know all the details, but IMHO this might be the time to cut your losses and start fresh. I think I probably would. The emotional toll of working and scrimping to pay for past decisions and nothing left for the future would be overwhelming. We all make mistakes somewhere along the way (don't ask me about those timeshares!).

The Storyteller
2-16-11, 10:11am
Ah. Nonrecourse state was the term I was looking for. Here is a list:

District of Columbia (Washington DC)
Montana (as long as non-judicial foreclosure is used)
Nevada - note that the lender CAN get a deficiency judgment (See below)
New Hampshire
Texas (but even in a non-judicial foreclosure, the lender can pursue a deficiency judgment)
West Virginia

Source: http://www.mortgagereliefformula.com/recourse/

2-17-11, 8:51am
You may want to look for a mortgage attorney, who could assist you in figuring out what the consequences might be in either case. You could start with youwalkaway.com and see if they have a list of contacts for your state, or at least some books/articles to get you thinking. Because each state is slightly different it would be best to speak with someone who is familiar with the laws in your state. You would also want to consider the issue of your loan to your retirement. IMO, that would be the thing to concentrate on because 1) usually bankruptcy proceedings/foreclosure proceedings cannot take retirement $$ and 2) a retirement loan if not paid back before terminating with the company will incur taxes and fees plus leave you with that much less money for retirement (plus whatever interest it would have earned). Most of the time, financial experts would agree that >50% of take-home pay going towards just a mortgage isn't sustainable, esp if there is a balloon payment due sometime soon that you know now you will likely not be able to cover. It may wind up being best for you to live in the house without paying mortgage for however long the bank lets you, saving that money and especially paying the retirement debt, then starting over. But this is something that's much better to spend a few hundred $ on getting good advice than just trying to wing it. This whole housing bust has been a wringer for many people-you're not alone even if it may sometimes feel like it when you're struggling.

2-17-11, 6:33pm
Thank you all for your suggestions. I do live in a non-recourse state, thankfully. I can rent from friends and my kids can stay sometimes. thanks for the website youwalkaway.com. it's just a house, not a farm.
blessings to you all

2-17-11, 6:41pm
How old are your kids? How often are they with you?

2-24-11, 11:25am
farmgrrl, I am in a somewhat similar situation - again, due to some life events - and feel your pain. It sounds like you instinctively know what you need to do - let go of the house - but I know that is a hard path to take.
Please know you are not alone, come here for support and keep us posted!!

2-24-11, 8:18pm
For $1000 www.youwalkaway.com (http://www.youwalkaway.com) willoversee/help me with the entire foreclosure; i can send all mail i get about it to them, they will stop the creditors from calling, i can rent out the house, i get to talk to an attorney and a cpa for 30 minutes each, they will keep me posted as to where the foreclosure process is at by pulling records from the county weekly.
i also spoke to an affiliate of theirs about a modification; they want to charge $4500 after they get my info and get me terms from the actual mortgage holder, supposedly they only charge if it works. i have to have missed 3 payments though for a modification to be considered. im wondering if i can do it myself and not make a mess of it or spend too much time messing with the mtg company. any do a mod themselves?; my payment goes to GMAC .

2-24-11, 11:04pm
I haven't heard good things about the modification stuff-the bank screws around and "loses" paperwork, then when/if you *finally* get some sort of deal worked out the payment drops...a little bit. If you're spending upwards of 50% of your income on the mortgage you'd have to get them to drop a lot. Sustainable levels of mortgage debt are (or should be) clocked at 33% or lower. The 33% figure is a squeeze and could be an unsustainable one esp if there is any other debt, you're behind on retirement savings, you have childcare costs, large transportation costs, a variable income, and older home with ongoing maintenance or high bills, high taxes, etc etc etc. Do the math as to how much the bank would have to lower it to get something you could *reasonably* pay then check around to see if anyone going for the sort of modification you're looking for is actually getting that from your bank. I would be very skeptical about someone who demands a large fee in order to do a modification. If it's a lawyer then maybe it's legit but I've heard plenty of stories of people who got doubly screwed by shysters making a buck off people in a rough situation. It's sick but you've got to expect the possibility and check...better business bureau, internet reviews of the company, etc. It might seem like a lot of work, but how long would it take you to earn $4500? A few hours figuring things out is worth it. You also have to ask yourself what you will do in each possible situation: what if you did get a modification but it was still somewhat tight? Would you want the house still? What would happen if you went to foreclosure? Do you have a plan regarding having a poor credit rating for multiple years? Have you thought of creative ways to potentially keep the house? Although some of these options may ultimately be not right, you'll feel better knowing you considered everything and picked the least worst. Lots of others are in the same boat or have sailed the same rough waters. Finding a support group (esp one cheap or free!) may be invaluable-try craigslist, meetup or scouting your various community info boards/websites and the like. And of course SLN folks are here to be a sounding board & support group, too! Good luck on all this.

2-25-11, 1:25pm
Wow, both options seem pretty steep (costly), considering the overall financial picture!

2-25-11, 10:58pm
We actually did lose our farm this year--well sold it to get out of debt, and then bought a tiny foreclosure house for cash. Have paid off all debt and have paid for medical bills for unexpected surgery and for son's wedding this year.

So I say, if you can let go of the house, by all means do so. Sometimes it feels heartbreaking, yes, but the weight of the accumulated debt was SO stressful--like Fawn said, sounds like the bank owns the house. I realized that what I wanted more than anything was a manageable life. Sounds like you are at thatpoint. Good luck with this, farmgrrl!

3-7-11, 10:16pm
i have decided to attempt the loan modification process on my own. one thing the loan mod company(that wants $4500 for the process) said is that i have to be at least 3 months behind on payments; so im not paying my mtg for the next 3 months! i will use the extra cash to get ahead on some bills, i.e. house/auto insurance, HOa, fix the leaking tub so i can rent the house out if i end up in foreclosure, debts.
any thoughts about how not to let gmac make me crazy?'thx

3-7-11, 10:36pm
Please look for a non-profit housing assistance organization that can help you with the loan mod process. Paying a for-profit business is nuts. They are sharks.

3-7-11, 11:22pm
i will use the extra cash to get ahead on some bills, i.e. house/auto insurance, HOa, fix the leaking tub so i can rent the house out if i end up in foreclosure, debts.
any thoughts about how not to let gmac make me crazy?'thx

??? Rent the house out if you end up in foreclosure??? Do you mean put a deposit on a house to rent if you wind up in foreclosure? You wouldn't be renting out your house; that's sort of the point. Double-check on the being behind on payments. While I have heard they won't do much for you if you are current on payments, you also can get into a slippery slope when not paying. So do your homework. Have you called any of the govt programs/housing assistance orgs like redfox mentioned? A great place to start. I would really recommend looking for consumer credit counseling services in your area...they will likely point you in the right direction and may be able to counsel you as well. A bankruptcy attorney is not a bad few hundred bucks to spend to get their opinion/your options (not necessarily saying you'll declare but some attorney who deals with debt issues should know the laws in your state/region). If you fail to make a mortgage payment your credit will drop. This may be collateral damage considering your issues, and you may already have damage from other bills, hoa, etc. If you do plan to foreclose I'm not sure the hoa payment is necessary but not sure. The hoa will go after you though if you don't pay/haven't been paying so if you are trying to keep the house then it might be worth it to pay. Good legal advice through all this will likely be worth the money. Good luck.