| What to do with underwater house |
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DJSal
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| What to do with underwater house |
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Years ago my wife and I were going to divorce and I basically sold her the house for $1, in order to get my name off the mortgage and title so I could purchase my own home. We both worked and have always made about the same salary. As it turns out we reconciled after a few years and are together now in the same house. Over the course of the years she has consolidated her credit card bills into a second mortgage and said this was great because she would now be able to deduct the additional interest at tax time. Well, she is a spendaholic and did this about three times, burning through all the equity and bringing the mortgage balance up to about $220k, which was the home value before the housing meltdown. Now a few years later the house value has tumbled to around $150k and the neighborhood is changing. We would like to move elsewhere but cannot sell the house since it is worth much less than what is owed, and the mortgage holder (Citifinancial) won't even modify the loan from an unheard of 10% (due to her poor credit) to a more reasonable 5% or somewhere close to the going rate. We are paying about $2k per month and are barely making a dent in the principle. I have enough savings to put 20% down on a home purchase and have excellent credit but I don't know what is best for both of us in the long run. Should I buy a home by myself and have her walk away from her mortgage? This doesn't sit right with me as we were raised to pay our debts but I don't want to be stuck here if the town turns into a ghetto. What to do? Sorry for my long first post.
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Tue Jul 26, 2011 4:00 am |
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littleroc02us
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Do you think it's moral to walk away from an agreement that she signed? If you do then I most certainly would never want to do business with her or you because I couldn't trust your word. Do the right thing. Personally I think you are going to have a ton of trouble anyway, because miss spendaholic needs to change her ways or you will be in more serious trouble further down the road.
Romans 13:8 “Owe no man any thing, but to love one another: for he that loveth another hath fulfilled the law.”
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Tue Jul 26, 2011 1:33 pm |
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oldguy
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quote:
and the mortgage holder (Citifinancial) won't even modify the loan from an unheard of 10% (due to her poor credit) to a more reasonable 5% or somewhere close to the going rate.
The whole point of the 10% loan is to compensate the lender for taking a high risk on someone with poor credit - the "going rate" is for people who responsibly repay their loans. And it looks like the lender made the right call - you guys are considering stiffing your lender.
Why don't you use your $40,000 savings to pay down some of the $220,000 loan - then you will be closer to qualifying for a new loan on that house.
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Tue Jul 26, 2011 2:27 pm |
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DJSal
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Thanks for the replies. Yes, my wife definitely needs to change her ways when it comes to her finances. I think she is slowly realizing that this has caused a huge problem and it will only get worse. We are not considering walking away. We both always pay our bills and always have. The 10% rate that Citifinancial has on her mortgage is not a penalty for having bad credit, but simply the going rate back in the 90's when she applied for the loan. Perhaps a point or two were added since her credit is not the best, but she has never failed to pay her debts. Her problem stems from too much debt and late payments. She may pay late (meaning a week or two max), but she always pays. I was hoping there would be a way for the mortgage company to offer a refi while adding my name to the mortgage and basing it on my credit just so we can get a decent rate and pay it off quicker. If I used my savings it would be like pouring money into a black hole. It would be gone and we would still have zero equity. That is pouring good money after bad. Maybe we need to rent this place and move to a better location and hope for the housing market to rebound. It would take years and years trying to pay her mortgage off early due to the high interest rate.
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Tue Jul 26, 2011 10:26 pm |
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Jason Drakes
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I think you need lots of maintenance for underwater house and it is not impossible to construct but it will cost you hell of money.
condos for sale in chicago
Last edited by Jason Drakes on Sun Jul 31, 2011 8:30 am; edited 1 time in total |
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Wed Jul 27, 2011 12:37 pm |
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littleroc02us
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So lets say you put 20k down on the 220k you would owe around 200k. How long would that take for you to pay down so that you have 20% equity so you could sell. You said that the value of the house is around 150k and in order to have 20% equity you would need to pay it down to 120k. So basically you would need to pay down 80k to get there. If you can find a way to pay extra calculate exactly how long it would take to pay off 80k principle.
Romans 13:8 “Owe no man any thing, but to love one another: for he that loveth another hath fulfilled the law.”
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Wed Jul 27, 2011 1:11 pm |
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oldguy
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quote:
Well, she is a spendaholic and did this about three times, burning through all the equity and bringing the mortgage balance up to about $220k, which was the home value before the housing meltdown.
Don't lose sight of the fact that the loan wasn't used to buy a house - the loans were used to buy toys. Can you sell some of the toys - cars, campers, and so on? The proceeds should rightfully go back into the house.
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Wed Jul 27, 2011 1:58 pm |
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DJSal
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quote:
Originally posted by oldguy
quote:
Well, she is a spendaholic and did this about three times, burning through all the equity and bringing the mortgage balance up to about $220k, which was the home value before the housing meltdown.
Don't lose sight of the fact that the loan wasn't used to buy a house - the loans were used to buy toys. Can you sell some of the toys - cars, campers, and so on? The proceeds should rightfully go back into the house.
That's one of the amazing things about her spending. With that much debt racked up you would think that there would be a Porsche in the garage along with boats, RV's, and all sorts of other cool stuff. That is not the case. All I ever saw were countless QVC and HSN boxes delivered almost on a daily basis containing Chinese made crap. She had these two home shopping places on speed dial. She no longer does this kind of thing but she did it for years. Maybe I need to find another job or something.
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Wed Jul 27, 2011 5:43 pm |
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kate032
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Paying late is not the same as paying on time. Even though she may have made the payment, it counts against her if it's late.
Also, if I'm not mistaken, since you are legally married, her debt is your debt. To really secure your future, you may need to take a tough love approach, with her surrendering all credit cards and the checkbook. Not only does she need to immediately cease on extra purchases, she needs to cut back on normal expenditures, as well. People in tough circumstances like yours can climb out, but not without a great change of attitude and spending habits.
You really can't afford to move, but if you begin a spending diet and stay in your house as long as you can, your housing value may rise and your debt begin to fall.
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Fri Jul 29, 2011 3:20 am |
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JensynMcCoy
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Yep it sure is. I plan on keeping that house anyway in case my parents want to move into it someday. My house is way smaller then theirs and has way less property to maintain. Otherwise I will rent it out. I've already paid 8 years into it and my mortgage is still way cheaper than paying rent.
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Thu Aug 25, 2011 4:32 pm |
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eastmn
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At 10%, C needs a good stiffing (shearing).
It's perfectly understandable why C wont adjust/modify. It's because your payments aren't behind. The Fed program probably works the same, that you must be significantly overdue; must show income/expense ratio problem. C may hire an investigator to find assets and wages (lien/seize/garnish), so be careful. Looks like you guys might do better with a lawyer (threaten suit/bankruptcy, force a deal). Also keep in mind that debt forgiveness is taxable, while disputed debt is not.
I know a guy in Oregon who did a short sale and pocketed 20K 
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Thu Aug 25, 2011 6:53 pm |
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eastmn
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DJ,
I thought this might give you some direction 
Many years back, my brother had a situation where he hired a lawyer in order to walk away from a house/mortgage. He'd bought a corner lot off of a main road which was commercial with the house at the rear. He stayed in the home for about 10 years, 2 children. Well, neighborhood went down, robbed, etc... Then put up for sale, but 2 or 3 years passed where he simply could not unload it; became desperate...
Hired a lawyer, where the lawyer went and acquired all documentation and had my brother go over every single document and signature. Bingo. Century21 (or somebody) had forged his name to some appraisal "waiver" document. Bingo. Lawyer wrote nasty letter to all parties; and brother moved out and mailed the keys to the bank. Legal edge was against Realtor, not necessarily the bank, which might be why Lawyer threatened bank with bankruptcy (no win situation). Never heard another word about it.
Keep in mind that he immediately went out and bought a 2500 ft home before any credit damage had occurred. As far as I know, the bank did not report the default to the credit bureau due to the legal situation. The bank may have went after Century21, but never heard anymore about it.
robo-signing...
Edit: They were coming out of that house, regardless...
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Last edited by eastmn on Thu Sep 01, 2011 6:44 pm; edited 1 time in total |
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Sun Aug 28, 2011 5:54 pm |
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Jade456
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The only moral way out is to pay down the debt. You got into the mess, you'll have to get out. If your credit is still good, you're best bet is to refinance it yourself and put a lot down. Get rid of her credit cards, pay them off and close them.
Search Las Vegas Homes for Sale on the largest Las Vegas real estate site online, plus real estate news.
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Wed Aug 31, 2011 5:16 am |
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eastmn
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Here's some rough numbers:
Average US Home Cost is $250k + 1.75% misc.
5% 30 year mortgage = $575k Total ($1,602.47 monthly)
10% 30 year mortgage = $883k Total ($2,454.35 monthly)
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Sub-Prime Pays Additional $308k ($852 monthly) or 35% more.
Again, 35% more... (353% vs 230% on principal)
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Last edited by eastmn on Fri Sep 23, 2011 6:22 pm; edited 6 times in total |
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Thu Sep 22, 2011 7:42 pm |
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