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Hi, I bought my 1 bedroom condo in Paradise Valley, AZ on 8/06 for $175,000. I took out a 5 year interest only ARM and put 10% ($17,500) down + closing costs. I've since moved to Long Island New York because I was about to lose my job, and am now renting the condo out to someone. The rent I collect ($825 a month) doesn't cover the mortgage and Home owners association payments ($1300 a month). I don't know what to do. I was told since it's not owner occupied anymore , I'll be paying just as high a rate to refinance. I don't want to sell the condo, because I'll take a big loss.
Is it worth throwing more money at my principal balance in this case? I can't sell and take this huge loss. The $21,000 for down payment and closing costs was my entire life savings and I've been paying this all on my own.
Right now, I'm paying rent in New York and the extra $500 to cover the rest of my mortgage in Arizona. I don't know how much longer I'm can make ends meet considering I make $46,000 a year here in New York.
Any advice would be appreciated,
I have never missed a payment, and I've put $1,500 towards my principal balance over the past couple of years. I don't have a good idea what my condo would go for nowadays, and I don't plan on selling right now.
With credit score in the 730's, my rate was 7.5% on the 5 year interest only ARM with 10% down. Again, I'm about two years into the loan.
I can't refinance, and I can't sell. I'm collecting rent ($825 a month) although it doesn't cover the $1,083 mortgage w/ property taxes, and $194 Home owners association fees every month.
I'm 29 years old.
Any advice would be greatly appreciated. I need some ideas of where to go from here.
Wow, 7.5% on an interest only ARM is a raping, hate to say it that way, but that is horrible. Even today you could have gotten a much lower rate than what you got 2 years ago...
In the end, sometimes you just have to take a lump and deal with what life dealt you. I knwo it stinks, but doing a interest only ARM while giving up your life savings for the down payment was not a wise decision. Too late to take that one back.
The thing you don't want to do now is allow this to affect your future. I would continue to rent it, paying the difference from your salary/income. An extra 500 dollars a month for a single guy should not be a huge hit to take. If you have to cut out coffee in the AM at starbucks, or start eating Ramen noodles for lunch instead of going out, then thats what it takes. But make it happen until you can get back ahead of things. Also, next time you rent, make sure the rental agreement covers as much of the payment as you can...
Is the job market so bad that you can't go back to AZ? I don't know how you can pay rent in NYC and the $500 deficit on 46k a year.
If you really can't make ends meet, you are throwing good money after bad if you are going to lose the condo anyway. But you said you are young - do you have any hope of getting a raise or someone to split your rent with in New York? Can you pick-up a part time job?
I don't know the laws in AZ, but in some states the bank can come after you for the loss after a foreclosure. There are a lot of finance folks who could help you run the numbers on fatwallet.com.
I've made every payment. Bank won't modify my mortgage. Rate will reset in 2 years. It's like the grim reaper is waiting for me. I need advice, please.
A person with your credit score should have been able to get a thirty year fixed loan. I HATE BANKS!
1. Be thankful that you have a job and a renter to help with your mortgage. You are doing better than most in your situation.
2. Find out how much your house is worth. Zillow.com can help you with that.
3. Contact your lender to find out how much money is needed to qualify for a refinance. You have good credit. Call other lenders. You need a thirty year fixed. Call FHA to find out your options.
4. Get a better paying job and/or a second job to come up with the amount needed.
I Know Arizonia has been hit hard by the housing crisis. I hope the value of your home has not gone down much. Based on the information you provided, the principal owed on your mortgage is 156,000. I think you need 20% of equity in order to refinance.
Did you price the rent correctly? If so, the condo is not going to be a good long term rental property.
How long do you plan to hold on to the property? If it is less than 5 years, it may not be worth it.
I've made every payment. Bank won't modify my mortgage. Rate will reset in 2 years. It's like the grim reaper is waiting for me. I need advice, please.
You are correct because the condo is not your primary home and you are not 3 months behind (you've stated you have made all the payments on time).
So unless you have at least 20% equity, it's going to be hard to refinance a non-primary home with the banks.
But you can look it at this way. For those making less than 100K a year (the deduction is completely phased out at 150K), you can deduct your passive rental losses up to 25K a year. Professional real estate professional can deduct up to 25K losses a year regardless of income. So you can claim your mortgage interest, property tax, even homeowner insurance and HOA fees as a tax deduction. So while you are losing $500 a month, in reality you are losing around $375 with this tax situation.
At least you are collecting rent. It's not the the ideal situation to be losing money on a rental but at least you are collecting some income.
2 years is a long time but I do not know if the Arizona housing market will correct itself (I doubt it).
I'd get the property appraisal near the end of the lease. Than you may start asking the bank if they can do a short-sale if you can't cover your lost. You are still young. You will take a credit hit but I doubt you would be ready to buy another home in the next 3-5 years anyways and your credit will improve in that time anyways if you keep paying on time with your other obligations.
The past year has me looking at things in a completely different light. You're paying interest only, which is the equivalent to 6.25% amortized. A refinance on an 80%, 30 year fixed, non owner occupied mortgage is going to be hard pressed to beat this rate, today. To refinance today, it's going to be more along the lines of the high 6's. 80% is no longer considered the optimal loan-to-value for an investor refinance mortgage, let alone a condo that may or may not be warrantable by Fannie, Freddie or FHA. This is a very tough time for condos, when bills don't get paid, the HOA is the first to go. Very few HOA's can push (or would want to push) hard. Liens, yes, but get in line. This is why many condos are failing now, resulting in the inability to obtain financing. This fact alone can add 1% to 2% to the rate.
I recommend you talk to a LOCAL Arizona loan officer for an opinion. Are you prolonging the agony? If so, contact an attorney to get your legal options and then contact the lender to pursue options. Right now, there is a moratorium on write downs being taxed Federally. I don't know if that is for all write downs, or just owner occupied. You obviously left the home for the best reason there is, you did what you had to do. (For some reason, I think Arizona is exempt from the bank's losses being taxed as income, but please double check).
The situation could be better than what you may think or it could be worse. We tend to put off what we think is going to be bad news. That could be very costly in your case. What I fear is rather "sick" is you won't find any relief or help for 2 reasons. One, you are not behind in your payments, and two, your condo is now a rental unit. Those two reasons is reason enough for me to nudge you to not sit on this too long. Get answers and find out what you need to keep your eyes and ears open for in the way of changes. Find out your liability with and without a tenant.
I only know the worse time to seek help is when you reach crisis level. Please ask your questions beyond this forum.
I've made every payment. Bank won't modify my mortgage. Rate will reset in 2 years. It's like the grim reaper is waiting for me. I need advice, please.
have you tried a loan modification agency? i don't know much about them, but i believe this is what they can do for you. i hear they are more likely to speak to a loan mod. agency than you.
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