Posted on: 08th May, 2009 09:05 am
We bought our house in 2006 (unfortunately) in Arizona. Anyway, we put about 80,000 down on the house (20%). We put approximately $35K in improvements in our house. Between our first mortgage (10/1 ARM) and our HELOC, we owe approximately $365K. It was a bit more than we could chew, as my wife no longer worked, but I figured we'd survive as I was getting bonuses + I figured annual salary increases, it would get easier with time. Well bonuses stopped as have annual increases because of the economy. My employer keeps making cuts in work force and I may be laid off next. Property values are about 1/3rd of what they were. Anyway, in that time, I have acrued $25K in credit card debt, and have wiped out about $50K in savings to stay in my home. My wife has since gone back to work (which was probably another mistake), but we are still struggling because of what we owe + the credit card debt we've accrued. I feel like an idiot.
I'm done! I want out. My house which I paid @ $425K + $35K (HELOC) is only worth about $150,000-$170,000. I owe more now than twice its worth. With down payment & monthly payments I've actually spent @ $180K of my money already in 3 years. I only have about $10K in the bank now. We aren't saving anything monthly (can't afford to). I talked to a lawyer about a loan modification, but they told me banks don't usually redo principal balances on loans though they may be able to get me a lower rate. He said they might be willing to forgive the HELOC, but IMHO its a drop in the bucket. The government and banks created this mess, the banks get bailed out and homeowners get the shaft.
Being so upside down, I do not think its worth it as I think it will be 10-15 (maybe longer) years before this market recovers IMHO and we don't want to be in the house that long. Our original plan was to stay in the house for about 5-7 years and sell it. We are in our 40s, and since we moved in, two of our four kids have moved out and the house is getting to big for us. This is a bad investment and I want to cut my loses. Every time I write the check for the mortgage, its like being forced to make a bad stock purchase every month and I feel sick. I currently have excellent credit, but am willing to throw it all away because I see no end. I don't want to redo my loan if I'm stuck in my house pretty much forever. I don't want to hire a lawyer, waste my money if the bank wouldn't be willing to redo my principal as well as my rate.
What doesn't make sense to me is that banks are really unwilling to work with people so upside down like me. They spend many thousands for foreclosure + sit on a property for a while and sell it for these deflated rates; when they could really save many $10K by working with homeowners. Would I be willing to pay 10-15% over current market value for my home, lower my rate and I'd sign some 5 year guarantee to the bank if I sold my home for more than the renegotiated mortgage, then I'd give the profits back to the bank? Sure I would. These are extrordinary times.
Sorry for being so long winded. What are my options and the ramifications of those choices?
I'm done! I want out. My house which I paid @ $425K + $35K (HELOC) is only worth about $150,000-$170,000. I owe more now than twice its worth. With down payment & monthly payments I've actually spent @ $180K of my money already in 3 years. I only have about $10K in the bank now. We aren't saving anything monthly (can't afford to). I talked to a lawyer about a loan modification, but they told me banks don't usually redo principal balances on loans though they may be able to get me a lower rate. He said they might be willing to forgive the HELOC, but IMHO its a drop in the bucket. The government and banks created this mess, the banks get bailed out and homeowners get the shaft.
Being so upside down, I do not think its worth it as I think it will be 10-15 (maybe longer) years before this market recovers IMHO and we don't want to be in the house that long. Our original plan was to stay in the house for about 5-7 years and sell it. We are in our 40s, and since we moved in, two of our four kids have moved out and the house is getting to big for us. This is a bad investment and I want to cut my loses. Every time I write the check for the mortgage, its like being forced to make a bad stock purchase every month and I feel sick. I currently have excellent credit, but am willing to throw it all away because I see no end. I don't want to redo my loan if I'm stuck in my house pretty much forever. I don't want to hire a lawyer, waste my money if the bank wouldn't be willing to redo my principal as well as my rate.
What doesn't make sense to me is that banks are really unwilling to work with people so upside down like me. They spend many thousands for foreclosure + sit on a property for a while and sell it for these deflated rates; when they could really save many $10K by working with homeowners. Would I be willing to pay 10-15% over current market value for my home, lower my rate and I'd sign some 5 year guarantee to the bank if I sold my home for more than the renegotiated mortgage, then I'd give the profits back to the bank? Sure I would. These are extrordinary times.
Sorry for being so long winded. What are my options and the ramifications of those choices?
Hi steven,
You are facing a tough situation as the mortgage amount is huge whereas the property prices are at all time low. It is correct that not all lenders would not be ready for a principle reduction but lenders can always modify your loan depending upon your financial situation.
However, as you do not want to save the property, you can apply for a deed in lieu. But, you should also note that it will be the lenders discretion to know whether he would accept your request or not. If the lender accepts your request, then your property will be sold off but you won't be liable to pay the deficient amount resulting from the sale of the property. Generally, this forgiven amount is considered as your income and you will be charged taxes on it but depending upon your state laws, you won't have to pay those taxes.
Thanks
You are facing a tough situation as the mortgage amount is huge whereas the property prices are at all time low. It is correct that not all lenders would not be ready for a principle reduction but lenders can always modify your loan depending upon your financial situation.
However, as you do not want to save the property, you can apply for a deed in lieu. But, you should also note that it will be the lenders discretion to know whether he would accept your request or not. If the lender accepts your request, then your property will be sold off but you won't be liable to pay the deficient amount resulting from the sale of the property. Generally, this forgiven amount is considered as your income and you will be charged taxes on it but depending upon your state laws, you won't have to pay those taxes.
Thanks
This is really a true story of all those who had thought that the 'investment in the house' is really a time proof investment but in my opinion it is not what it was supposed to be.
So in this way it is really a good idea to go for the loan interest rate negotiations.
This will surely help to place one in a good financial situation once again.
But still what I feel is 'time is cure for all this problem'.
Wait.... The moment will come when your house will be again evaluated as par of the original investment.
Keep us informed.
So in this way it is really a good idea to go for the loan interest rate negotiations.
This will surely help to place one in a good financial situation once again.
But still what I feel is 'time is cure for all this problem'.
Wait.... The moment will come when your house will be again evaluated as par of the original investment.
Keep us informed.
So how do I proceed with a deed in lieu? My mortgage and heloc are both with Wells Fargo. What is the diff between that and just letting them foreclose? Is it hard to get? Do I need to hire a lawyer?
I can save the money from my mortgage to get those credit cards paid down. Of course, something tells me to save as much money as I can. I know I will be short a few hundred this month to pay my mortgage (once a year bills (property taxes on vehicles, insurance, etc)); usually I put these charges on credit cards, but I refuse to do this any more.
Daniel, I don't want to be in my 60s when I get out of this house (that's if I'm lucky). I need to get this done and move on with my life. I've been contiplating this for well over a year. I agree I made a really bad decision and I paid for this with the loss of my $80K downpayment, high payments for the last 3 years, dwindling saving, and credit card usage and the soon ruining of my excellent credit score.
I can save the money from my mortgage to get those credit cards paid down. Of course, something tells me to save as much money as I can. I know I will be short a few hundred this month to pay my mortgage (once a year bills (property taxes on vehicles, insurance, etc)); usually I put these charges on credit cards, but I refuse to do this any more.
Daniel, I don't want to be in my 60s when I get out of this house (that's if I'm lucky). I need to get this done and move on with my life. I've been contiplating this for well over a year. I agree I made a really bad decision and I paid for this with the loss of my $80K downpayment, high payments for the last 3 years, dwindling saving, and credit card usage and the soon ruining of my excellent credit score.
Hi steven,
You can write a hardship letter to the lender and apply for a deed in lieu. You should state your financial crisis clearly in the letter. The lender will judge you financial situation based on that letter and then decide whether he would accept your request or not.
Deed in lieu is not hard to get. You can negotiate with the lender yourself. If you don't feel confident to negotiate with your lender, then you can hire an attorney to deal with them.
Thanks
You can write a hardship letter to the lender and apply for a deed in lieu. You should state your financial crisis clearly in the letter. The lender will judge you financial situation based on that letter and then decide whether he would accept your request or not.
Deed in lieu is not hard to get. You can negotiate with the lender yourself. If you don't feel confident to negotiate with your lender, then you can hire an attorney to deal with them.
Thanks
So what's the diff between letting them foreclose and a deed in lieu regarding me?
- Is there a difference in credit hit?
How long before I can buy again?
How best to repair credit after this and quickly?
How long does a deed in lieu take?
Should I put things on credit cards until its approved or does it make a difference if I cannot pay my mortgage this month since I'm letting it go anyway?
What if I'm denied a deed in lieu?
Anyone know who at Wells Fargo to discuss this with?
What qualifies as a hardship? No one is sick. Our income has actually increased with my wife going back to work.
Hi steven_b46,
Both deed in lieu and foreclosure will effect your credit in a similar way. Your score will be reduced by 250 points and it will stay in your credit report for 7 years. However, the main advantage of deed in lieu is that you won't be liable for the deficient amount.
You will have to wait for 3-4 years in order to buy a property after deed in lieu or foreclosure.
To repair your credit after foreclosure or deed in lieu, check out the following link:
http://www.mortgagefit.com/credit-rating/credit-repair.html
A deed in lieu will take around 90 days to complete.
Lenders won't accept your deed in lieu request if you are current on your mortgage payments. So it is not a good option to pay off the mortgage through credit cards.
If you are denied of deed in lieu, you may apply for a short sale. If the lender refuses even that, then he will start foreclosure procedure against you. Your hardship will depend upon your financial situation.
Both deed in lieu and foreclosure will effect your credit in a similar way. Your score will be reduced by 250 points and it will stay in your credit report for 7 years. However, the main advantage of deed in lieu is that you won't be liable for the deficient amount.
You will have to wait for 3-4 years in order to buy a property after deed in lieu or foreclosure.
To repair your credit after foreclosure or deed in lieu, check out the following link:
http://www.mortgagefit.com/credit-rating/credit-repair.html
A deed in lieu will take around 90 days to complete.
Lenders won't accept your deed in lieu request if you are current on your mortgage payments. So it is not a good option to pay off the mortgage through credit cards.
If you are denied of deed in lieu, you may apply for a short sale. If the lender refuses even that, then he will start foreclosure procedure against you. Your hardship will depend upon your financial situation.