Underwater homeowner

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This topic contains 2 replies, has 2 voices, and was last updated by  optimist 12 months ago.

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  • #152566
    optimist
    Participant

    I’m 10 years into a 30 year fixed rate mortgage. I’m upside down about 10k (based on a failed sell attempt and Zillow estimates). Property is in CA, I live in OR, live on spouses income only. House is rented for $1250, mortgage is about $1800. Monthly expenses in excess of earnings come from 401k (drawing about $2500/mo to keep up). I have a new 30 year mortgage on my OR property. My questions:

    > Can/should I get a new loan better than 6.5 APR to help defer negative cash flow? Am not eligible for a HARP refi.

    > Should I sell at a loss and bite the bullet? (i.e, bring $20k to the table).

    > Should I walk away from the property?

    Help – Wet and cold in OR.

    #153958
    SherrieL
    Participant

    Without knowing your full situation, it’s hard to say. If you itemize your taxes, you are probably paying quite a bit less in taxes, if not no tax at all. You do not mention your age, I hope you are 62 or older or you are killing yourself by withdrawing from your 401k (10% surtax! Ouch!) Can you raise the rent, even incrementally? Even $100-200 a month would help. If you got a mortgage in your current house, you obviously have decent credit, refinance the rental if you can and stretch the mortgage repayment term on your CA house (warning, rental property is never given as good a rate as owner-occupied). Don’t accept a 5-year balloon unless you can pay it off in five years (unlikely, it sounds). I would spend some $$ on a for-fee financial planner (around here, about a grand for a comprehensive) and figure out your options. (That’s also tax-deductible). Good luck! I definitely would not just walk away, it torches your credit for years, you never know when you will need it.

    #153968
    optimist
    Participant

    Thanks for the advice, you’ve got a good handle on this. We are both over 62. I think I might could get an additional $100-150 per month. I have wondered if the current tenants might want to entertain a lease-option or rent-to-own deal. If not, if I ever sell again (to someone else), trying to market the property with tenants occupied is probably less than optimal. That is a whole situation in itself…do I vacate the tenants and try to sell without assistance from months of rents payments?

    Anyway, I’ll pursue the refi route, as we can put up the needed monies to demonstrate ability to repay, and see where that goes.

    Encouraged in OR.

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