Comments on: What to do when you are upside-down on your mortgage …

By: rischa in seattle

rischa in seattle — Sat, 29 Aug 2009 17:05:22 +0000

from what Ive read I think were screwed, but Im not even sure what we can do. Here is the senario- my husband and I bought this house about 10 years ago in the boom herewith both of us working we could afford the mortgage and our lifestyle easily. Ive been laid off and weve been living on my savings which is now gone and im on unemployment, which is fast running out. were about 100K upside down, we got a trad loan 30 yr fixed, but without 2 incomes were sinking fast. we dont necessarily want to stay in this house, infact we want to move to a part of the country where the cost of living is less.
any clues? what should we do? how do we get out of this when getting out would cost more than we have even if we spent our retirement to get out. we would have less than nothing left!

By: Ooops! She broke the 25% Rule …. « How to Make 7 Million in 7 Years™

Ooops! She broke the 25% Rule …. « How to Make 7 Million in 7 Years™ — Fri, 29 May 2009 11:47:38 +0000

[...] The next housing problem that I wrote about, doesn’t affect me (as we paid cash for our houses) but, was how to deal with the now-all-too-common situation where you are ‘upside down’ on your mortgage. [...]

By: Speculating on your own home? « How to Make 7 Million in 7 Years™

Speculating on your own home? « How to Make 7 Million in 7 Years™ — Tue, 26 May 2009 14:16:43 +0000

[...] Investing, millionaire, property, real estate, Rich, Starting Out, wealth Ryan, who is upside down on his own mortgage asks: I agree that plenty of investments, if not most, will give you a better APR than your house, [...]

By: Adrian

Adrian — Fri, 22 May 2009 02:40:55 +0000

@ Alexandria – I am not you, so I can’t give you the answer!

But, this is a GREAT question and I will address in a more general way in a f/u post. Stay tuned and thank again!

By: Alexandria

Alexandria — Thu, 21 May 2009 17:53:34 +0000

Ok… after reading the above I want some options on my situation. Married, three school aged kids. Currently own a home with a high mortgage that is worth just about $50K more then we owe. Not the home of our dreams. We are not in foreclosure. I am self emplyed and my husband is a Police Officer. We can make our monthly mortgage but it eats up about 60% of our monthly income. We have no savings, a mininal 401 plan, no large other debt. We are both in our mid thrities. We can rent a much nicer home in our area for about $1k less then our mortgage a month. If you were us, would you sell and rent or keep the house?

By: Adrian

Adrian — Wed, 13 May 2009 10:10:53 +0000

@ Neil – Yardwork? Another benefit of staying in the downtown apartment

BTW: my ‘bunker strategy for surviving a recession’ post is in this week’s Money Hack’s carnival: http://www.myliferoi.com/2009/05/money-hacks-carnival-64-as-american-as-apple-pie/

By: Neil

Neil — Wed, 13 May 2009 05:24:58 +0000

Begin underwater is terrible. But at least it sounds like Ryan can still afford the mortgage (which does give him many more options). If he is committed to being in the house for several years, I’m sure he won’t have to suffer through a short sale.

You didn’t talk about the impact on your credit of a short sale. From a quick web search,it seems that it would lower a 720 rating by about 200 point if you had late payments, and you couldn’t convince the bank to go for it if you weren’t late several times. Yeetch. That will impact your ability to borrow money, get any other loan you need, your credit cards, and all that junk. Want to buy an investment rental? Forget it!

I’m actually convinced that if my wife and I stayed in our downtown apartment and invest the difference instead of getting a house we would better off right now. In my part of the US, rents did not increase at the rate of house prices. But I also feel that we would have been more extravagant and not invested the full.

Still, a house is a home. And we are fortunate enough to be neither underwater, nor concerned about missing a payment.

Now if only someone would do my yardwork for free.

By: Adrian

Adrian — Wed, 13 May 2009 03:45:16 +0000

@ Ryan – To tell you the truth, even though I paid cash (hence am not upside down) maybe not: http://7million7years.com/2008/05/17/oops-i-just-broke-the-20-rule/

By: Ryan

Ryan — Wed, 13 May 2009 03:04:32 +0000

@ AJC – touche.

On question ii, I’m assuming you are saying would you invest in your home at its current price, and without being upside down, right?

As always, thanks.

By: Adrian

Adrian — Tue, 12 May 2009 23:52:25 +0000

@ Ryan – This is POSSIBLY true IF you gain market appreciation; that’s called ‘speculation’. On the other hand, if you put the same money into a cashflow positive rental, then you make money on the rents and any future appreciation is a bonus; that’s called ‘business’