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We still owe money on our mortgage . In fact , it is more than our house is worth due to the down turn of the housing market. I may have a job transfer in the next year or 2 and will have to sell our house. what would be better ? To save money for a down payment on a house or put more money towards the principal of our present house ?
TIA
We still owe money on our mortgage . In fact , it is more than our house is worth due to the down turn of the housing market. I may have a job transfer in the next year or 2 and will have to sell our house. what would be better ? To save money for a down payment on a house or put more money towards the principal of our present house ?
TIA
I'd pay down your house. You can rent in your new location till you get enough for another down payment. The less you owe on the house the less you have to sell it for to get rid of the debt you own on it. Another thought is to rent out the old house if possible. Finally if you are transferring jobs like that it may not pay to own a house at all. Also the less you owe on the house the easier it is to refinace.
I should add the the only upside for saving for the down payment is that you would have more cash on hand should your job lay off rather than transfer.
There is NO advantage to putting more money toward principal when your house is currently valued less than you owe AND you may need to sell in a relatively short time.
You should ABSOLUTELY put any extra cash aside and you really ought to have a strategy to deal with the relocation and negative equity.
Let's just use some numbers for illustration.
Suppose you owe $100K. Current value is $75K. Suppose over next two years you tossed an extra $500 a month toward principle. Even if you have a low interest rate and a not brand new mortgage you'd STILL be under water by over $10K. If your job relocation will not have housing consideration you'd need to do a short sale and have NOTHING for a downpayment.
If instead you saved all that dough you would STILL have to do a short sale, and the lender MIGHT be a wee bit less reluctant to absolve you of nearly a 30% shortfall than one that is only about 10% short, but SHAZAAM you'd also have $12K in CASH toward a rent /downpayment in the new place.
Of course there are some assumptions here. Biggest one is that values stay ABOUT where they are now over the next two years. Hard to say how likely that is... Also very hard to predict that lenders will not try to get more aggressive in regards to short sale forgiveness. Who knows what sort of tax changes Obama will try and ram through.
I almost hate to mention this. Saved money is something that your lender may attempt to go after. You REALLY need to think just how, uh 'creative' you are willing to get in saving that cash. Do you have kids? Are you are on excellent terms with family? There are ways to plan for future events that could make your situation more compelling to your lender down the road... Planning for one course of action is far different that blindly doing something easy that could result in no benefit and ultimately harm your lender. Proceed cautiously.
Well, Op won't be buying any house (unless it's cash) if they sell short on their current and can't pony up the difference, right?
Right, but if it's in an account it's liquid. If they have to bring it to closing so be it, but there is no gain in this situation to paying down the principal with it. They could rent out the current home and use it for a DP on the new home. The liquid capital just opens up more possibilities.
Well, Op won't be buying any house (unless it's cash) if they sell short on their current and can't pony up the difference, right?
The politicians have deeply inserted themselves into this mess. I can easily see how (and why) the standards for getting a mortgage after a short sale might be modified and that possibility ought to be incentive enough to try and maximize CASH for possible downpayment.
Even if things remain pretty much how they are the CASH that one could save up for RENT (on any other need...) is far better than having locked in equity on an upside down house!
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Would not be so sure...
