Thread: my primary residence is not worth what I owe...my options?

"...fixed rate of 5.05%, which is where I have been since day one and will be for the next 25 years." -Does this mean you're planning on staying in this house for the next 25 years?

-CM

hmmm...i think that point is moot.......

if i stay for 5 more years and sell (possibly short sell..depending on the market at that time) and they renegotiate my interest rate...ill save thousands over that 5 years in Interest,

If i stay the next 25 years.....ill save thousands over the first 5 years and then thousands more in interest over the next 20.

i dont think the length in which I am planning on staying should influence this decision.

to me this is clear. if I walk away from this house, it will take a year or more to get me out...then they put it on the market for fair market value (345K). Going this route, the bank loses a year or more in payments, gets a house they dont want, puts it back on the market only to get what its really worth. Now the best thing for me is for them to cut the principle down to 345K. I do not think that will happen but they will have some flexibility on the term and rate.

I know one thing for sure, they will not do ANYTHING as long as I keep making my payments on time. On paper it shows that I do struggle making my monthly household payments. I think this is the right time to do this.

And honestly I am not sure why more people don't do this. At least people like me who have bought their houses at the peak (in the past 5 or 6 years). I understand about the fear and what being delinquent for 6 months will do to your credit, but when you look at the trade off in money saved in interest...and like i said for me its a no brainier having just filed for Bankruptcy.

The point isn't moot sir. If you were going to stay you should be asking yourself "What's the difference how much my house is worth?" Because the value eventually will go up, (ten years +). That's why.

ok so lets do some quick math then


ok so lets say i stay 10 years and the house goes up in value..lets say by 50K. So its 2020 and the house is now worth 395K and I owe roughly 325K....nice swing....

all well and good......so let me re-iterate my point then,,,,,this is more about taking advantage of a window of opportunity not what my house is worth at the moment.....we are in a rare time...when, if you bought a house in the past 5 years your house is over valued and the economy is still a mess and the foreclosure rate is at a high point....its about striking at the right time. I am holding the cards here, not the bank....i have no equity....if they took the house from me they would be doing me a favor....it would behoove them to work with me on the term and rate and keep me in the house. So that being said, what is the harm in trying? If they lock me in at lets says 3%, Id save thousands over the years. Why throw that money away regardless of how much my house WILL be worth 10 years from now??

I have a new wife and we are trying to get pregnant.....it bothers me more then you know that if I were to die tomorrow that I am leaving her a house worth less then what is owed on it. That wasnt my intent when I bought it. An there many players to blame over the RE crisis.....yes I am one since no one put a gun to my head however in my opinion....the investor is last on the list...greed was king...driven by the banks, realtors and mortgage brokers......now i think its time for some payback....

FYI...i bought a condo in 2005 in Fla....worth 215 at the time...short sold it last year for 89K...bank one accepted and forgave debt...bank 2 did not.....i had no choice but to agree (it was either this or foreclosure) and eventually forced my hand to Bankruptcy....

this is not the American dream....watching your blue chip stocks and 401K plummet are not the American dream.....watching RE investments plummet is not the American dream....everything i was told as a kid turned out to be a myth....there is no financial safety in this world...and now its time to take care of #1

Well the time to take care of #1 has always been, just more so now.

It sounds to me that you already know what you want to do: Short Sale it. Especially mathematically, you've got it all figured out and aren't going to stay in it.

Your lender may or may not take it back: times have changed and every lender is different. In my experience, nowadays, lenders do nothing but give people who are looking for either a loan mod or looking for them to take back their house, the run around. You'd be lucky to even get a Short Sale pack to show financial dire straits.

Real Estate is only one way banks make money so don't think they'll "have another house they don't want" and it's in their best interest to take it back. Banks don't work like this. Nothing they do is to make sense to the public.

Good luck.

why just jump to a short sale? Its clear what i really want. I want my rate lowered.

Okay, then, you've answered your question: a loan mod. But...
"...I just filed for Bankruptcy, my credit is shot for 7-10 years anyway..."

It's not likely your lender's going to modify your loan now.

Hypothetically, if they do, you'll be given two mod options:
1) Re-finance with new interest rate (higher now because you're bankrupt) based on CURRENT value
2) Re-finance with new interest rate (higher now because you're bankrupt)on original value.

After closing costs, a new higher interest rate and if you're not going to stay put, you're not saving anything. I know, #2 doesn't make sense, hey, look that's what the bank is going to offer you.

So, that'll leave you with only one other option: #1 above.

Let's say you owe $368k. Their appraiser's going to say it's worth $300k (current value). The bank is not going to forgive $68k. If you were a lender, would you?

your making this seem as if i do not have any leverage. If i stop making payments and 6 months goes by and they are talking foreclosure. i believe this is where i have the upper hand. Do you believe they will take this house back (may take 2 years to get me out and another year to get it occupied) instead of renegotiating my loan to something that would benefit me even slightly?

As you said every bank is different, so I don't think you can definitively know what they will do or not do. But I ask you this....what is the harm in trying?....if i push this 6 months and they do nothing....i simply pay back what I owe (i realize there may be penalties) and im back to where i was. If they renegotiate then i save $. Why not try?

I in my Real Estate experience, working daily with sellers and buyers and three people who work directly for Asset Managers and a very large bank, and since you're not making payments now and since you're bankrupt, the only thing the bank should do is foreclose.

I can not understand why on Earth you feel you have leverage when you can't make the payments now. I think it's because you feel it's in the bank's best interest to modify a customer's loan than for them to wait just another two months and begin the foreclosure process.

Good luck to you Karl.