We bought our house at the peak of the market about 3 years ago. We owe about $

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   nelsokelposted 14 years ago

   We bought our house at the peak of the market about 3 years ago.  We owe about $310,000 on it,...
   
   while it's market value is about $290,000.  Minus all the realestate fees and closing costs on selling the house we are probably upside down about $40,000.  We have no cash savings, no family to borrow from, a mortgage that cannot be refinanced, and a house payment that is $2300/month.  Although we have great jobs and excellent credit, we are getting no where financially at 30 years old.  Would it be better to blow our credit and bail so we can get a much needed bigger house, or should we waste the next 10 years throwing our financial resources down the drain?  Any other ideas or options?

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   mel22posted 14 years ago

   sounds like you're living outside your means... you say can't afford the smaller house but than want to get a bigger house..  do you need he house because you have lots of kids or just out of luxury. take the time to access what assets are lagging you from getting the bigger house and liquidate those assets( boat with payment, sports car with paymentor elegant dining which zaps finances)sacrifice those luxuries and get within your means first until your at the point of being able to mortgage a larger house.. until that time sacrifice luxuries and stay within your budget is all I can offer.

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   nelsokelposted 14 years ago

   Actually, we are able to afford this house, we just can't afford to pay cash to sell it, since it has lost so much value since we bought it.  We already live within our means in that we don't eat out extravagantly, or have any assets we are paying loans on (except for our cars), and have virtually no credit card debt..  What really kills us is our student loans which are about $600/mo, but there is not really much we can do about those.  We have a growing family and we want to move into a bigger house, one that would essentially cost the same as this, now that values have dropped so much.  My question is this:  How do we get out of this house and start making some financial headway, rather than staying here for the next 10 years throwing our money away to negative equity.  Is it worth it to foreclose just to start over?

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   KeithTaxposted 14 years ago

   Your question isn't a matter of survival,  but a matter of ethics and morals. You gave your word to pay the bank, hence the bank depositors, when you took the mortgage.
   
   You may be unside down on your mortgage now, but for how long? The real estate market will revive and the mortgage will slowly pay down. How long before your credit improves enough to buy another home? Will your home begin to appreciate in that time? These are real questions to ask.
   
   I could not stiff the bank or anyone else for that matter. But that is just me.

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   Lmootposted 14 years ago

   There needs to be some serious soul-searching and sacrificing that will need to be done. Many times in order to get ahead (especially financially) you have to take a step "backwards". Walking away and getting a bigger house for the same price is not an option IMO. If you can't afford the price of the house now, extra square footage is not going to change that.
   I can tell you that "blowing" your credit not only will not get you a bigger house, anytime soon at least, but it will likely set you backwards financially until you're almost ready to retire.
   It's good that you don't have cc debt but you mention that you are living within your means but have no cash savings. It's impossible for anyone living within their means to not have savings. Within your means does not mean you can pay your bills. It means you can pay your bills, save for retirement, and have 3-6 months emergency funds. Emergency funds are crucial when you have a house and especially children. I don't mean to sound preachy but I am only 25, put 20% down on my home, one income that's under 30k (gross) a year, and still manage to save a minimum of $250/ month. Granted I don't have student loans, and I do have a car loan, but I don't have a $310k mortgage. You mention you have car loans on two cars, with the $600 student loans. Do you need two cars? You could sell one, save the money, and save even more on paying insurance for just one vehicle and loans for one vehicle.
   It seems like you want to move on with your life with no sacrifice or consequences  and pick up where you left off, actually better than where you left off. Meanwhile people are selling their cars and taking the bus, or using one car, some folks are moving to less expensive areas, downsizing and other extremes. And if you do happen to get your bigger house that's the same price as the one you cannot afford (I am saying you cannot afford it because even though you are paying your mortgage, you have no cash savings which astounds me for two people with great jobs) your "blown" credit will make that bigger house even more expensive because your interest rate will be sky high.
   I also want to say that a house should not be seen mainly as an investment. It wasn't "throwing your money" away when you signed the loan.

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   bbbb7500posted 14 years ago

   The new rules now allow you to Short Sale your home without missing any payments as long as you can prove a financial hardship. 
   
   This may sound difficult to some but it's a pretty simple formula, debt to income ratio.  If you head over to my page at http://www.brentlane.net you will find the formula video so you can check things out further not to mention the video that explains a short sale and repurchase.
   
   Hope that helps.
   BL

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   patriot1776posted 14 years ago

   Your question is a question that is being asked by millions of Americans today. My quick answer is do not sell your home right now. It will be a much better market within the next couple of years. A more lengthy explanation is on my hub. Feel free to check it out or you can google "should I sell my home in this market".

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   MtShastaWriterposted 13 years ago

   Whether or not you choose to foreclose you need to understand if you are in a recourse state or not.  People in a recourse state can be sued for the balance owed on a home foreclosure.

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   MortgagesByMarkposted 13 years ago

   One option is to move out of the house and rent it out and purchase a new one. I have clients that have had to do just that. It's not an ideal scenario, but the rent payments will help cover the mortgage payments. If you do opt for this, do your homework first. Being a landlord can have a lot of pitfalls that can get you into trouble if you don't know what you are doing.

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