Posted on: 09th Feb, 2010 08:24 pm
Like many people today I am COMPLETELY underwater on my mortgage. In 2004 I purchased a condo for $130,000. In 2005 I refinanced my 2nd mortgage and saw that it appraised at 166,000. My secondary mortgage is a 30 year fixed while my primary is a 7 year balloon (I left it alone since I didn't intend to stay there for more than a couple of years)
At the beginning of 2009 I moved in with my significant other and decided to sell my place. I was told it was worth 75,000 and I owed $120,000 on it still. I decided to rent it out for a while and see where the chips would fall. I rented it out to family members for $700/mo (going rate for that unit is $900/mo and I actually pay $1200/mo between mortgages, taxes & assessments so even at the going rate . . . It's a loss) My renters ended up not able to afford the place and it'll be vacant again in a couple of weeks. I had some new broker price opinions shown to me and it's now in the neighborhood of $60,000. I'm looking at just over a year before the balloon mortgage resets . . .
My mortgage holder doesn't want to touch it, they referred me to my mortgage broker who's in charge of finding financing for this mortgage once the balloon is up. My mortgage broker winced when I asked what was going to happen and said to wait until it's closer to the reset date.
My question is . . . Do I just find another tenant and wait while taking a loss of at least $300/mo? My concern is that my credit will be ruined anyway in April of 2011. Am I better off just taking measures to drop the place now and ruin my credit now so it's also off my record that much sooner?
Other factors . . . I have no plans or desire to move back to that area and the condo has no sentimental value for me. Losing the condo is a total non-issue. My only concern is my credit but I don't feel that it's worth $70,000 to keep it.
At the beginning of 2009 I moved in with my significant other and decided to sell my place. I was told it was worth 75,000 and I owed $120,000 on it still. I decided to rent it out for a while and see where the chips would fall. I rented it out to family members for $700/mo (going rate for that unit is $900/mo and I actually pay $1200/mo between mortgages, taxes & assessments so even at the going rate . . . It's a loss) My renters ended up not able to afford the place and it'll be vacant again in a couple of weeks. I had some new broker price opinions shown to me and it's now in the neighborhood of $60,000. I'm looking at just over a year before the balloon mortgage resets . . .
My mortgage holder doesn't want to touch it, they referred me to my mortgage broker who's in charge of finding financing for this mortgage once the balloon is up. My mortgage broker winced when I asked what was going to happen and said to wait until it's closer to the reset date.
My question is . . . Do I just find another tenant and wait while taking a loss of at least $300/mo? My concern is that my credit will be ruined anyway in April of 2011. Am I better off just taking measures to drop the place now and ruin my credit now so it's also off my record that much sooner?
Other factors . . . I have no plans or desire to move back to that area and the condo has no sentimental value for me. Losing the condo is a total non-issue. My only concern is my credit but I don't feel that it's worth $70,000 to keep it.
Hi,
In my opinion, you should look to give away the property. Keeping the property does not seem to make any sense. There's no guarantee that you'll get another tenant soon. Even if you do get one, you will have to take a loss of $300 per month. If you save that money, you can use it to put down on a mortgage when you buy a home in future, Moreover, if you think you'll have difficulty when the balloon mortgage reset and fear that you'll have to leave the property, there seems to be no reason why you should delay the inevitable. If you let go of the property now, it will have a negative effect on your credit, but it will also give your some time to rebuild your credit and apply for a new mortgage in future.
In my opinion, you should look to give away the property. Keeping the property does not seem to make any sense. There's no guarantee that you'll get another tenant soon. Even if you do get one, you will have to take a loss of $300 per month. If you save that money, you can use it to put down on a mortgage when you buy a home in future, Moreover, if you think you'll have difficulty when the balloon mortgage reset and fear that you'll have to leave the property, there seems to be no reason why you should delay the inevitable. If you let go of the property now, it will have a negative effect on your credit, but it will also give your some time to rebuild your credit and apply for a new mortgage in future.
Thanks for the advice. I'm going to be going over all of this with an accountant and a real estate attorney to figure out what my best move is. I just want to make sure I'm not throwing away more money when . . . It simply won't matter a year from now anyway.
If anyone else has any two cents to add in it would be greatly appreciated!
If anyone else has any two cents to add in it would be greatly appreciated!