Posted on: 12th Sep, 2009 12:09 am
Our daughter's family (living in Henderson Nevada) bought a small townhouse for 250,000 just before the bubble burst (it was the best they could afford and they made sure everything was in a fixed rate). They have never been late with a house payment although it meant some mighty lean living for a family of six. They managed to negotiate a lower interest rate for one of the two loans they had to take but the bank will not budge on the other. In the last month she has gone back to full time work. Although tight they are still making it financially - again they have not missed one payment - but their small little home is bursting at the seams (literally), especially as their children grow. They do not indulge in luxuries (who can afford them) but would like to get into a home that at least has a family room and a kitchen a little bigger than a galley. Unfortunately, their townhouse is now worth about half of what they paid for it. Is there some kind of trading program or some other way they can be helped. Thank you for your time.
hi blefgren,
since the townhouse has lost its value, your daughter will not be able to sell it to pay off the loans. she will have to short sell the property and pay off the deficiency in order to satisfy the loan debts. if the value of the property is enough to satisfy the first loan amount, she can negotiate with the second mortgage holder and enter into some sort of repayment plan to pay off the second mortgage balance. this will help her sell the current house. however, this is going to affect her credit negatively, though not as much as a foreclosure or a deed in lieu of foreclosure will.
the only other option would be to wait for a year or two until the real estate market recovers from the depression. however, if she is finding it difficult to afford both the mortgages, she can request your lender to do a loan modification. this will reduce your monthly payments and help her stay current on the loan.
since the townhouse has lost its value, your daughter will not be able to sell it to pay off the loans. she will have to short sell the property and pay off the deficiency in order to satisfy the loan debts. if the value of the property is enough to satisfy the first loan amount, she can negotiate with the second mortgage holder and enter into some sort of repayment plan to pay off the second mortgage balance. this will help her sell the current house. however, this is going to affect her credit negatively, though not as much as a foreclosure or a deed in lieu of foreclosure will.
the only other option would be to wait for a year or two until the real estate market recovers from the depression. however, if she is finding it difficult to afford both the mortgages, she can request your lender to do a loan modification. this will reduce your monthly payments and help her stay current on the loan.
Shortsell is better option to satsfy debt as the value of propery is lost.