I'm 2 years into a 5 year interest only ARM on my condo. put 10% down. Complicated situation (Paradise Valley: short sale, foreclosure)

[Mike62]

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,

[Mike62]

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.

[S6Sputnik]

Wow, that is a terrible situation. You have paid nothing toward principle? Maybe give it to the owner?

[sheenie2000]

Post on the Mortgage forum within city data. You will get more responses and good advice.

[modsalon]

With that credit score and that much down how in the heck did you end up with 7.5%?
Are you sure you can't refinance?

Seriously call Kathy at O'Dowd Mortgage. I know everyone is totally turned of by lenders but she's the most honest, caring knowledgable lender I've come across. Many people I know use her and I would recommend her to my best friend and mother.
I can't say enough good things about her. If she can't help get you into a better situation, she'll be honest and let you know.

good luck, that's a tough situation to be in..



888.809.4200 (Toll Free)
602.248.4200 (Local)

[Bummer]

Originally Posted by Mike62

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.

Definitely not the best scenario, Mike.

MY TWO CENTS WORTH . . . don't sell and don't refinance right now. If you are happy with your tenant and they are planning to stay, I would suggest just "hanging on" for about a year or so. In the meantime, toss every bit of spare change you can find to reduce the principal as much as possible.

Think positive and remember, your monthly negative will help you at tax time.

[AZgarden]

Well I would try to get the tenant out and raise the rent significantly. That is a pretty cheap rent for Paradise Valley and I think you could get more. Don't give anything away!!! This is an investment which will turn around when you refinance and get another tenant in there. How did you get this tenant for the place? Did you check the other rents in the area? Hopefully you will also get a raise at your NY job too.

[abmiku]

Just let it go back to the bank and be done with it....once it's gone you'll be sleeping like a baby. If you just save that $500 per month, you'll have your $21,000 back in 3.5 years. How long do you think you'll have to hang on to that condo before you can sell it and get you money back. Try a short sale first, if that doesn't work, do a deed in-lieu-of foreclosure. Your credit will be screwed for a while, but it's better for your peace of mind in the long run.

[Mike62]

Thanks for the advice. I'm going to call the bank and see if they can help me in some fashion, because once my loan resets in 2011, I'm really screwed. I feel like I have no way out. At the time when I bought, I thought I could refinance a couple of years down the road. As a first time home buyer, I thought I was making the best investment of my life.

Hopefully the bank can help me, because I'll be screwed in a few years when this ARM resets. Are they also helping people who have decided to rent out their properties?

[Beena]

Renting it was truly dangerous in my opinion. Once you turned that into an investment property the rules changed regarding refinance and 1099 forgiveness should you end up with a foreclosure or short sale.

I spend a lot of time reading the stories on loansafe.org and your scenario is repeated over and over again. And to be completely frank and honest.....these are people asking which life boat should I jump in after all the life boats have left the sinking ship. There is no easy answer and the price you paid will probably not be coming back any time soon.

You can take the morally honest route and continue renting as you are for as long as possible and maybe move back into it one day. Or you can join the crowd and walk away. Personally, I would honor the committment, continue paying, continue renting it, and eventually make every effort to turn it back into an owner occupied property one day.