Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
I said I was done arguing on this subject, but it's hard to bite my tongue on this one.
Zevpoppy's posts sounds like the uni-bomber's manifesto. Anti-everything.
Sorry, there I go again.
He is the other side of the conservative view that you use your kid's college money and your 401K to stay current until you run out and then you get foreclosed.
I bought a nice 1,200sf condo in 2006 for $245,000 in a real nice hoa. It is 100% financed interest only. The current market value of the condo is $60,000 at best. From a financial logic standpoint, it makes no sense to keep paying the mortgage. The bank already told me they are not going to sue me for deficiency.
Giving this situation, would you...
1. Mail the keys back to the bank.
2. Keep paying the mortgage.
People get really hung up on the "financial standpoint", but it depends on how you view your property. Assuming you could continue to pay, do you see your condo as:
A. Just an asset held for the purpose of a return on investment
or
B. A place where you want to live and that you are comfortable in being able to afford?
If the answer is B, then there is no reason to stop paying and move out right now. People would have done much, much better for themselves if more of them had viewed a home purchase as B and not as A.
On the other hand, if you can't afford your payments...then A and B are irrelevant, you overextended yourself, and you'll have no choice really but to deal with the consequences. And that, by the way, is definitely the best economic choice even with the credit hit, because at least you can remove yourself from most of your cash flow issues and work on rebuilding a savings cushion under different circumstances
How long would it take a $60,000 condo to recoup $185,000 in equity back to $245,000? Maybe 15 to 20 years? Oh, I'm sorry -- it's more like 30 years (at 5% a year). And THEN you'd be at ZERO equity!?! Hum, let me think......
I suggest, stay as long as it's helpful, and walk as soon as you can. Starting over (credit, etc) will be MUCH QUICKER!!
And if you need to feel better about it (if that's your decision), read the article link in the initial post replies -- Wall Street Journal - When It's OK to Walk Away From Your Home ROI: When It's OK to Walk Away From Your Home - WSJ.com
I don't understand the 100% financing and interest only. Is he only paying the interest every month?
Yeah...where he is does not fully make any sense. That kind of loan is virtually always term limited at 5 year or 7 years or such. The deal is to bide you over until you can get permanent financing.
So normally one with that sort of financing is doomed to get foreclosed or short sold as the loan will come due quickly and will not be refiable. That may well be why the lender is so cooperative...it is inevitable that the lender will have to give...
Yeah...where he is does not fully make any sense. That kind of loan is virtually always term limited at 5 year or 7 years or such. The deal is to bide you over until you can get permanent financing.
So normally one with that sort of financing is doomed to get foreclosed or short sold as the loan will come due quickly and will not be refiable. That may well be why the lender is so cooperative...it is inevitable that the lender will have to give...
Ok, that makes more sense. There's no way he's going to be able to get further financing, so he won't have a choice but to walk away. The decision to get an interest only is pretty odd. This is just the kind of funny business that helped create the current mess.
Ok, that makes more sense. There's no way he's going to be able to get further financing, so he won't have a choice but to walk away. The decision to get an interest only is pretty odd. This is just the kind of funny business that helped create the current mess.
Under some circumstances it can make good sense. A relative rode three years on an interest only saving 15,000 per annum over what he could get regular financiing for. Then he converted to a regular mortgage. He was still $45,000 ahead.
I would note that if he had timed it badly he could have lost his house. Then again in this instance the guy had relatively high equity.
Under some circumstances it can make good sense. A relative rode three years on an interest only saving 15,000 per annum over what he could get regular financiing for. Then he converted to a regular mortgage. He was still $45,000 ahead.
I'm lost here. If you don't mind, can you spell out how he would be $45k ahead? I'm interested in learning.
I'm lost here. If you don't mind, can you spell out how he would be $45k ahead? I'm interested in learning.
He had an interest only mortgage at 3.0% rather than the six percent he would have normally had to pay. So he was paying only 1250 versus the 2500 for a normal 6% mortgage. When the teaser rate expired at 3 years he went to a conventional 30 year 6%. So for the three years he saved 1250 per month or 36x1250=45000.
It is actually not quite that good. Tax impacts means he was actually saving less and he had to pay closing costs of a few thousand when he refied.
(Note the numbers are not exact...just illustrative. I don't have the exact numbers at hand.)
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
30 YEARS to regain equity?
