Help re: home payment

[atomicrc11]

I also agree you need to get out. Even if you pay the $630 loss and more to the principal, the reset of your mortgage is going to be a real shock and you will be losing more money than you currently are. Unfortunately when you have a losing position, sometimes you just have to sell and take the loss. It is better than staying with a sinking ship.

[savemachine]

Wow...thanks for all the responses guys. This seems to be more urgent that what I had imagined. In fact, I was not expecting this type of reaction at all.

Everybody seems to be in the same conclusion though. Another thing that I had not mentioned (sorry again, I didn't think it was pertinent), was the fact that 60K was put in towards the principle for this house initially. You can see why I'm going to be a bit reluctant in selling the house. 60K gone plus another 20-30 percents loss if I sell this house at the moment.

I had just thought of something. What if I pay down the principle enough (about 20K) to lower my principle to such that the amount of the loan owed is less than the value of the house (my house did fall that much). Would it be ideal to refinance?

Or is this "get out while you can", no matter which way I spin it.

[jIM_Ohio]

Originally Posted by savemachine

Wow...thanks for all the responses guys. This seems to be more urgent that what I had imagined. In fact, I was not expecting this type of reaction at all.

Everybody seems to be in the same conclusion though. Another thing that I had not mentioned (sorry again, I didn't think it was pertinent), was the fact that 60K was put in towards the principle for this house initially. You can see why I'm going to be a bit reluctant in selling the house. 60K gone plus another 20-30 percents loss if I sell this house at the moment.

I had just thought of something. What if I pay down the principle enough (about 20K) to lower my principle to such that the amount of the loan owed is less than the value of the house (my house did fall that much). Would it be ideal to refinance?

Or is this "get out while you can", no matter which way I spin it.

Your issue is your costs are greater than the income the rental provides you.

Paying down the principal is a COST to you- the problem is still there (you need the rental to recoup those costs).

You recoup the costs by raising the rent.

Your suggestion is based on you looking at the problem in terms of cash flow. That will improve your month to month situation, but it does not necessarily make the rental a better or worse investment.

You have already made the investment in the rental. Any money you put to problem to improve cash flow is a cost to you. As a business man it is important you do something to recoup the costs.

Raising rent is the obvious solution.
Consult with a tax accountant- he may have some ways to get the money back via taxes either short term or long term.

Putting 60k of your own money "in" was a mis timed/ mis informed decision.

Your goal was financial independance- you should do some research on the ways to accomplish that. If you want to be a landlord you need to learn how to recoup the costs you are incurring through income taxes, rent or other techniques. Find a good tax accountant and run your situation by him. It will be worth the $200 or $500 you pay him to get a second opinion.

Most of us on this board are not landlords, and have no experience being landlords (myself included). I have thought about it, but your situation is one more reason for me to avoid that line of business.

[LivingAlmostLarge]

Your investment is losing money hand over fist. Any landlord will tell you to dump it. It doesn't have a Return on Investment at all. You are negative. How and why to buy a property where rent doesn't cover the mortgage is always a bad idea.

[disneysteve]

You really need to look at the fact that the longer you hold onto the house, the MORE money you LOSE. Every month, you LOSE $630.

The only thing that would reverse that is if the value of the home started appreciating. Obviously, current market conditions are such that that is highly unlikely to bail you out here.

The home is currently worth about $200,000, correct? You are losing $7,500/year or 3.75% of current value. Even if the house gained 5% in value in the next year (which is unlikely), it would be worth $210,000 but you will still have lost the $7,500, meaning your actual gain would only be $2,500 or a 1.25% return on your money. And that assumes nothing changes to increase your costs, like taxes going up or some repair being needed to the house. Add in a 4% inflation rate and you are still losing ground even if the house starts appreciating.

Sorry, but I don't see any way that this becomes a money-making venture.

[savemachine]

*hangs head in shame*

Thanks all, I'm going to sort this out and will keep you posted.

[FoolFromAZ]

Originally Posted by disneysteve

You really need to look at the fact that the longer you hold onto the house, the MORE money you LOSE. Every month, you LOSE $630.

The only thing that would reverse that is if the value of the home started appreciating. Obviously, current market conditions are such that that is highly unlikely to bail you out here.

The home is currently worth about $200,000, correct? You are losing $7,500/year or 3.75% of current value. Even if the house gained 5% in value in the next year (which is unlikely), it would be worth $210,000 but you will still have lost the $7,500, meaning your actual gain would only be $2,500 or a 1.25% return on your money. And that assumes nothing changes to increase your costs, like taxes going up or some repair being needed to the house. Add in a 4% inflation rate and you are still losing ground even if the house starts appreciating.

Sorry, but I don't see any way that this becomes a money-making venture.

Hi Steve,

My situation is pretty similar to OP. I am upside down on my house. I bought for about 330K now the similar house is being sold for around 240K. I still have 280K left in my loan. I am currently living in the house. I am paying around $2000 every month towards mortgage payment which include tax and insurance. If I had stayed in the apartment I wud have only paid around 1200 per month for rent. So I am losing nearly 800 every month. this house is on my name. my wife is working and she has good credit score. Should I consider short sale or foreclosure? Will I find any problem with finding a job when i look for it next time if my house is foreclosed?

[jIM_Ohio]

Originally Posted by FoolFromAZ

Hi Steve,

My situation is pretty similar to OP. I am upside down on my house. I bought for about 330K now the similar house is being sold for around 240K. I still have 280K left in my loan. I am currently living in the house. I am paying around $2000 every month towards mortgage payment which include tax and insurance. If I had stayed in the apartment I wud have only paid around 1200 per month for rent. So I am losing nearly 800 every month. this house is on my name. my wife is working and she has good credit score. Should I consider short sale or foreclosure? Will I find any problem with finding a job when i look for it next time if my house is foreclosed?

You are only losing money on paper.
$2000 month is house payment. What is income (gross and net), what other debts do you carry, and when do you see the need to move (retirement, kids move out, job change, other)?

Keep paying the $2000 each month. If your move out intention was 20 years from now when kids were graduated from college, more than likely you will recoup the 90k difference.

I am probably upside down on my mortgage (bought for 352k in 2005, house across the street just sold for about 275k I think). Granted our house is bigger by about 500 sq ft and our lot is better (originally the builder asked 325k for that same house which was finished in early 2006).

Wife and I do not plan to move until kids are grown (that will be 18-24 years from now). I think we can wait for market to rebound.

If you are employed and can make the payments, be patient- you only lose money if you sell now. If you don't need to move, don't.

[disneysteve]

Originally Posted by FoolFromAZ

Hi Steve,

My situation is pretty similar to OP. I am upside down on my house. I bought for about 330K now the similar house is being sold for around 240K. I still have 280K left in my loan. I am currently living in the house. I am paying around $2000 every month towards mortgage payment which include tax and insurance. If I had stayed in the apartment I wud have only paid around 1200 per month for rent. So I am losing nearly 800 every month. this house is on my name. my wife is working and she has good credit score. Should I consider short sale or foreclosure? Will I find any problem with finding a job when i look for it next time if my house is foreclosed?

Your situation isn't similar at all. OP is talking about an investment property, not his primary residence. His is a home that he purchased with the intent of making money but instead he is losing hundreds every month.

You are talking about your own residence. You aren't losing anything. You are building equity. The only way you would lose money is if you were forced to sell while you were still upside down on the loan.

[FoolFromAZ]

Originally Posted by jIM_Ohio

You are only losing money on paper.
$2000 month is house payment. What is income (gross and net), what other debts do you carry, and when do you see the need to move (retirement, kids move out, job change, other)?

Keep paying the $2000 each month. If your move out intention was 20 years from now when kids were graduated from college, more than likely you will recoup the 90k difference.

I am probably upside down on my mortgage (bought for 352k in 2005, house across the street just sold for about 275k I think). Granted our house is bigger by about 500 sq ft and our lot is better (originally the builder asked 325k for that same house which was finished in early 2006).

Wife and I do not plan to move until kids are grown (that will be 18-24 years from now). I think we can wait for market to rebound.

If you are employed and can make the payments, be patient- you only lose money if you sell now. If you don't need to move, don't.

I dont have plans to move out. I am a software engineer. Currently market is ok here in the phoenix area. but in the future we never know. But we dont have any plans to move out for atleast next 10 yrs. its really a terrible feeling when I see same size house as mine is being sold for nearly 100k less that what I paid for my house. some of my friends are suggesting me to walk away from this house and buy a cheaper home on my wife's name and keep the monthly payment around $1000 which is very much possible at this time. I thought this is the best time to buy for first time buyers.

We make over 150K but we have over 45K in CC debt, mortgage of $2000 and car payment of nearly $700 with insurance.

[FoolFromAZ]

Originally Posted by disneysteve

Your situation isn't similar at all. OP is talking about an investment property, not his primary residence. His is a home that he purchased with the intent of making money but instead he is losing hundreds every month.

You are talking about your own residence. You aren't losing anything. You are building equity. The only way you would lose money is if you were forced to sell while you were still upside down on the loan.

yes not exactly similar. but i too thought about investment when i bought this home. for my family 3 bedroom house is more than enough. If I had gone for that I wud have paid 50K lesser and my monthly payment wud have been around $1400 which is not too high. but I opted for 4 bedroom house and we hardly use two bedrooms. paying atleast $600 more for the home every month which if i had invested in stocks or mutual funds, even in ing cd, I wud have saved lot of money by now. or i wud not have had 45k CC debt now.

[disneysteve]

Originally Posted by FoolFromAZ

some of my friends are suggesting me to walk away from this house and buy a cheaper home on my wife's name

We make over 150K but we have over 45K in CC debt, mortgage of $2000 and car payment of nearly $700 with insurance.

Your friends don't sound like the type of folks I'd go to for personal finance advice.

As for the CC debt and car payment, what's that all about? If you are having to charge daily expenses because all of your money is going to support the mortgage, you've got a serious problem. And what kind of car are you driving that is costing you $700/month? Are you upside down on that loan, too, or can you sell the car and get out of that deal?

Originally Posted by FoolFromAZ

i too thought about investment when i bought this home. for my family 3 bedroom house is more than enough. If I had gone for that I wud have paid 50K lesser and my monthly payment wud have been around $1400 which is not too high. but I opted for 4 bedroom house and we hardly use two bedrooms. paying atleast $600 more for the home every month which if i had invested in stocks or mutual funds, even in ing cd, I wud have saved lot of money by now. or i wud not have had 45k CC debt now.

That's a whole different story. You bought a house you didn't need in hopes of flipping it for a profit. That isn't investing. That is speculating.

[LivingAlmostLarge]

Technically making $150k and a $2k mortgage, we're around there and it's manageble. I think you aren't managing your money well.

[FoolFromAZ]

Originally Posted by LivingAlmostLarge

Technically making $150k and a $2k mortgage, we're around there and it's manageble. I think you aren't managing your money well.

I am not saying I am having problem paying $2000 every month. Its a terrible feeling when someone buys a house similar to your house size and paying $600 less than what you pay everymonth. i have 45k in cc cos i got 0% apr which I used for my downpayment and also to buy furniture and other stuf I used my cc . anyway i am paying down my cc debt. hoping to finish it off in 12 to 18 months.

i bot new odyssey and only put down $1000, thats why i am paying $700 for car payment and insurance ($160 as my wife is new to driving).

[maat55]

FoolFromAZ,

If I were in your position I would consider the shortsale. You could make a longterm attempt to get out of debt and keep this house, but you have to decide if it is worth it. The younger you are the easier the decission to stay is.

If the house is causing you to take on CC debt, I would sell in a heartbeat. If you like your home and are willing to sacrifice to keep it, you may be able too. But doing what you are doing is not working. 700 for a car payment, is a major stumbling block.

I personally would sell the house and car and payoff the CC debt as quickly as possible. IMO, financial peace is far more important than things. It's not easy for a whole family to agree on such a change, I hope that you can start to stumble in the right direction from here on. Good luck to ya.

[jIM_Ohio]

Originally Posted by FoolFromAZ

I dont have plans to move out. I am a software engineer. Currently market is ok here in the phoenix area. but in the future we never know. But we dont have any plans to move out for atleast next 10 yrs. its really a terrible feeling when I see same size house as mine is being sold for nearly 100k less that what I paid for my house. some of my friends are suggesting me to walk away from this house and buy a cheaper home on my wife's name and keep the monthly payment around $1000 which is very much possible at this time. I thought this is the best time to buy for first time buyers.

We make over 150K but we have over 45K in CC debt, mortgage of $2000 and car payment of nearly $700 with insurance.

no plans to move means you have not lost any money.

friends making suggestions to walk away is bad advice. How could you get a loan in wife's name? Any time wife or I applies for a loan (car, house) they check both our credit. Any lender which doesn't is not a lender I would trust.

150k income is not the issue
45k in credit card debt is an issue (what is the interest rate?)
$700 car payment may be an issue (that is same payment I have, but I chose a short 4 year loan on a honda ridgeline). What kind of car?
The cc balance plus new car value is HALF your gross yearly income- that is the issue- more than likely your concern is about cash flow, not losing money on the house.

If you pay off the debt, I think your financial concerns will be mitigated.

[FoolFromAZ]

Originally Posted by jIM_Ohio

no plans to move means you have not lost any money.

friends making suggestions to walk away is bad advice. How could you get a loan in wife's name? Any time wife or I applies for a loan (car, house) they check both our credit. Any lender which doesn't is not a lender I would trust.

150k income is not the issue
45k in credit card debt is an issue (what is the interest rate?)
$700 car payment may be an issue (that is same payment I have, but I chose a short 4 year loan on a honda ridgeline). What kind of car?
The cc balance plus new car value is HALF your gross yearly income- that is the issue- more than likely your concern is about cash flow, not losing money on the house.

If you pay off the debt, I think your financial concerns will be mitigated.

intrest rate on credit card is 0% to 6%. but some of 0% offers expiring in 6 months. 35K debt on CC and 10K on my wife's. i have been moving the balance from one card to another and sometimes from my card to my wife's card. thats how i have been managing to keep it under reasonable intrest rate. beginning of the year i had 60k in cc.

yes car payment is killing. i bot a new odyssey 5 months ago. I also drive my 97 camry. insurance for two vehicle comes around $160. $540 for the car payment for 5 yrs.

[FoolFromAZ]

Originally Posted by maat55

FoolFromAZ,

If I were in your position I would consider the shortsale. You could make a longterm attempt to get out of debt and keep this house, but you have to decide if it is worth it. The younger you are the easier the decission to stay is.

If the house is causing you to take on CC debt, I would sell in a heartbeat. If you like your home and are willing to sacrifice to keep it, you may be able too. But doing what you are doing is not working. 700 for a car payment, is a major stumbling block.

I personally would sell the house and car and payoff the CC debt as quickly as possible. IMO, financial peace is far more important than things. It's not easy for a whole family to agree on such a change, I hope that you can start to stumble in the right direction from here on. Good luck to ya.

this is what my friend suggested.. told me consider short sale or foreclosure. buy a new one on my wife's name or stay in the apartment.
But i really like my home and the community. i have some friends in our community.

i feel, selling my mini van is not a great idea. i currently have 24.5K left in my car loan. if i sell, i wud only get around 20k. anyway i need a reliable vehicle to commute to work. my 97 camry is not reliable any more. if i buy something for 10k. i wud have to make a payment for 10K +4.5K which wud come close to what I am paying right now.

[disneysteve]

Originally Posted by FoolFromAZ

I am not saying I am having problem paying $2000 every month.

If you have no cash flow issues, I don't see that this is necessarily a problem. Are you able to pay all of your bills comfortably and meet your savings goals? If so, just keep doing what you are doing?

Could you improve your situation? Sure. You bought too much house and had the misfortune to buy at a market peak. You also absolutely bought too much car. One need not spend $26,000 to get a "reliable vehicle to commute to work". Unless you are running the company carpool, you probably don't need an Odyssey for commuting. Also, you took out too long of a loan, a sign that you were buying beyond your means.