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Me and my wife bought our house in NY in 2007 for around 395K and the price now has fallen to 340K.
We now have to relocate to a different state and are not ready to take over 50 to 80K loss by selling the house.
We have 30 years fixed mortgage (with PMI) with 6.5% rate through Wells Fargo. We tried to negotiate for a better rate but they had no option due to our income level.
What do you suggest? I am paying around 4K a month for my mortgage that includes the taxes. Should I sell it now and take the loss OR hold it for a while and pay the monthly?
I have few ideas of my own but would like to hear your suggestions.
Thanks in advance.
I would sell it asap and get as much as you can. I think the more you hesitate the more you will loose. I do not think the market has hit bottom yet and you risk chasing the value downward. So price right list for 340 and see if you get a buyer if not lower it.
I know its easier for me to say then to do but your already loosing 4k per month plus each months declining value.
Can you handle paying the mortgage and another house payment where you live? Are you willing to become a long distance landlord and deal with a rental?
Do you think that homes will start to appreciate again or do you think that homes will continue to depreciate? And then do the math to see how long you need to hang on to the house to get back to even...
We went through the same about a year ago. It didn't make any sense to us to hang on to the home knowing we were not going to be living in that area ever again. We bet right - the same home is now selling for about $50,000 less and continuing to decline. Was it a hard pill to swallow to take on the debt of a house we no longer own - yes. But at the end of the day, it would have cost us a lot more money to hang on to the house.
Me and my wife bought our house in NY in 2007 for around 395K and the price now has fallen to 340K.
We now have to relocate to a different state and are not ready to take over 50 to 80K loss by selling the house.
We have 30 years fixed mortgage (with PMI) with 6.5% rate through Wells Fargo. We tried to negotiate for a better rate but they had no option due to our income level.
What do you suggest? I am paying around 4K a month for my mortgage that includes the taxes. Should I sell it now and take the loss OR hold it for a while and pay the monthly?
I have few ideas of my own but would like to hear your suggestions.
Thanks in advance.
You have to pay the piper unfortunately as you figured that housing always goes "up" in value. Its really not your choice whether you are ready or not.
Either suck it up and take your loss, or sit tight and don't view your home as an "investment". It is a place to live, first and foremost.
If you are relocating to another state, will you be able to rent it out for 4K?
If not then you'll have to cover the shortfall. So you'll be bleeding money every month plus having to deal w/ the headache of a rental property in another state.
You should just cut your losses now and take the hit. You can bleed money slowly over a span of a few years or just rip it off like a bandaid and get it over with now.
You move on now, you can look ahead to figuring out ways to build up your investments with a different strategy.
I want to add I am a landlord and I would not consider renting it out.
The house will be destroyed. You might think you will be able to find good people and they will take care of it, your wrong! I don't think people know how to take care of things anymore. We are in a throw away society.
First of all thanks to all the responses. We were pleasantly suprised to see so many helping answers.
First of all, to clarify a question, we are NOT planning to rent the place out. The max we will get for the house is 1500 a month and we cannot risk it being destroyed for that money which is not even half of our mortgage.
Most of you suggested selling the house which was our first inclination. However that would make us incur over 60 thousands in losses. This might be better than waiting out, paying 4k a month for a year or two. However, isn't it better to Foreclose or Shortsell than take that big of a hit? After all is credit worth 60K?
I had mentioned an idea that I had and would like to hear your input.
I am considering restructuring my mortgage, most preferably to a low interest ARM or even interest-only-loan. What this will do is reduce our monthly payment to almost half and would let us weight-out for a year-two-or even three years. Say, we we weight for 2 years for the price to go up where I will sell it for a price that would make my investment even; say the monthy payment is now half of what I pay now. THis means I lose out 48K after two years which is less than 60K now.
THe problem? Here are some I can list:
1. Noone can guarantee that home price will pick up by two years. If it doesn't we are in a big loss.
2. Banks normally don't refinanace if your home's worth is less than your loan amount.
3. We gotta add other home expenses for keeping the house for 2 years, onoccupied. I think this will be offset by the tax return we will get from the house though (remember 4K a month includes the property tax).
First of all thanks to all the responses. We were pleasantly suprised to see so many helping answers.
First of all, to clarify a question, we are NOT planning to rent the place out. The max we will get for the house is 1500 a month and we cannot risk it being destroyed for that money which is not even half of our mortgage.
Most of you suggested selling the house which was our first inclination. However that would make us incur over 60 thousands in losses. This might be better than waiting out, paying 4k a month for a year or two. However, isn't it better to Foreclose or Shortsell than take that big of a hit? After all is credit worth 60K?
I had mentioned an idea that I had and would like to hear your input.
I am considering restructuring my mortgage, most preferably to a low interest ARM or even interest-only-loan. What this will do is reduce our monthly payment to almost half and would let us weight-out for a year-two-or even three years. Say, we we weight for 2 years for the price to go up where I will sell it for a price that would make my investment even; say the monthy payment is now half of what I pay now. THis means I lose out 48K after two years which is less than 60K now.
THe problem? Here are some I can list:
1. Noone can guarantee that home price will pick up by two years. If it doesn't we are in a big loss.
2. Banks normally don't refinanace if your home's worth is less than your loan amount.
3. We gotta add other home expenses for keeping the house for 2 years, onoccupied. I think this will be offset by the tax return we will get from the house though (remember 4K a month includes the property tax).
Would love to get your input.
While I recognize your dilemma, foreclosure is a BIG scarlet letter and shouldn't be taken so cavalierly. You will not only be blacklisted from buying another home (perhaps in your new state), you'll also encounter problems when you rent. A landlord runs credit checks and if he sees a foreclosure due to something other than a catastrophic event, he/she might not be inclined to rent to you because it shows, in their eyes, irresponsibility.
Short sales are for people who undergo catastrophic events like the loss of a job, disability, and true hardships. Taking a financial hit doesn't qualify as a hardship. Homeownership isn't like stocks, where if you start bleeding money you can just bail out. The market is volatile and can go up and down. Like posters said previously, a home is where you live, not truly an investment. That said, sell the house now while you still can get something. It's a bitter pill to swallow, but of the two scenarios I think it's the right thing to do. Note, I am all for people walking away who suffer the loss of an income due to lay offs and the like. In your case, you have a high income, so unfortunately banks aren't going to sympathize and if you think hard on it, you can see why.
I'd also say loan restructuring - maybe try for an interest only, preferably a ten year one. Since you have no plans to stay in the home, it might be best, but the market may or may not pick up to a sufficient level where you will not incur a loss at some point.
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