At a loss, needing advice

**bjl584** · 06-19-2012, 04:40 AM

If I were your husband priority #1 would be to raise income. What does he do for a living? Can he find a new position with a different company? Can he take on a part time job? I have a part time job in retail and I made $10,000 at it last year just working weekends and one week night. I could work more hours there if I wanted to.

**PartyofSix** · 06-19-2012, 05:07 AM

Priority #1 is definitely to raise income. He's in education, and the upside to his new job is that he will have regularly contracted hours (whereas previously he never knew what time he'd be coming home.) So I'm very hopeful about an extra job. However, I'm trying to look at things from a "worst case" scenario. IF neither of us got hired doing anything extra, what is the best way to handle our situation?

**bjl584** · 06-19-2012, 05:19 AM

Originally posted by PartyofSix View Post

Priority #1 is definitely to raise income. He's in education, and the upside to his new job is that he will have regularly contracted hours (whereas previously he never knew what time he'd be coming home.) So I'm very hopeful about an extra job. However, I'm trying to look at things from a "worst case" scenario. IF neither of us got hired doing anything extra, what is the best way to handle our situation?

If he is in education, then a part time job shouldn't be a problem at all. If it's elementary or high school, then every weekend, every weeknight, and all summer long he will be off work. That's plenty of opportunity to find side work.

Worst case scenario, you start tapping into your retirement. But, I'd probably try to sell the house before I did that, assuming that job prospects were that bleak and you suddenly find yourself in too expensive a house with no light at the end of the tunnel in the foreseeable future.

**jpg7n16** · 06-19-2012, 08:06 AM

Originally posted by PartyofSix View Post

I have figured out that at the new income, we will be at least $24k short on our budget for the year. Obviously goal #1 is to try and make up that difference somehow.

Our mortgage (plus all the other stuff) is $1700/month.

Rent would be approximately $1300 per month according to what I am currently seeing available (and more likely maybe $14-1500.)

So by selling the home and moving, you may only cover 10% of the shortfall? (1700-1500 = 200 *12 = 2400/year)

If the shortfall is really $24k, you need much more than just a new home.

Husband is co-owner of family property (farmland) which is valued at $300k. Selling is not an option. (I've already asked.) Only the small income he makes from this has to be listed on our hardship application (not the land value itself.)

Why is selling not an option? I know you've asked, but what was the reason?

If "to keep it in the family" then what about selling his share to the rest of the family?

Husband has about $115k in stocks/bonds/mutual funds. Also has separate retirement account (but has not been able to contribute in two years.)

Hubby has that stock money. Should we cash that in and use it to pay down the loan? Paying enough to get rid of mortgage insurance only decreases our monthly payment by %60/mo. Barely a dent.

If you were going to sell stocks and pay down the loan, why only do enough to rid of PMI??

I would likely pay down enough to refi. Here's what I mean, if you paid down to $110k and refi on a new 30 year @ 4.25%, your new payment would be $541.13 + taxes/insurance. Yes, that uses about half the investment portfolio, but that's a pretty sizable savings each month at a time when you really need it.

That would reduce your payment around 800-1000/month, or $10-12k/year. That's quite a return on $60k. (16-20%) It will pay for itself in cashflow savings in 5-6 years. Over the next 10 years, that's $120k of savings. Do I need to continue?

I'm very confused as to how we should proceed. We are on different pages because I see that stock money as our only survival option right now, and he sees it as retirement funds and we-are-absolutely-not-touching-that-money.

I would focus more on what is best for us in the longrun with those funds. The point of retirement funds is to help you sustain your living throughout retirement.

I'm not at all interested in staying in this house. And with our high tax rate, I don't really have the desire to own again anytime soon.

Whoa. Wait a sec. I thought you just dropped $28k in income. Your post makes it seem like your income isn't that high at all. So how are you in a high tax bracket??

What is the new income?

If you're making enough to be in a high tax bracket, and you have a budget shortfall of $24k, you have too much in your budget. Could you please post a complete monthly budget for review?

And if you're in a high bracket, then you'd prefer the mortgage for the tax deduction of interest.

**terces** · 06-19-2012, 09:02 AM

Originally posted by jpg7n16 View Post

Whoa. Wait a sec. I thought you just dropped $28k in income. Your post makes it seem like your income isn't that high at all. So how are you in a high tax bracket??

I believe she's talking about property taxes... I have family in IL and they are high in some areas.

**Petunia 100** · 06-19-2012, 09:55 AM

Is your lender one of the 5 named in the National Mortgage Settlement? If so, a refi is likely headed your way.

If your budget will be short 24k per year, you need to cut 2k per month. A mortgage refi will help, but is not going to be nearly enough all on its own. Where will the rest of the money come from?

I agree with the others, you need to look at all of your spending, not just your housing expense. Do you know what you are spending each month? If not, you need to sit down and figure it out ASAP. You may want to use a budgeting tool. I love Mint.com, but any tool which works for you is just fine.

**PartyofSix** · 06-19-2012, 10:17 AM

Posting quickly, thanks for responding so far, I'll read and soak it all in in a bit.

For taxes being high, I mean property taxes. Last year we paid $5k, each year they go up slightly.

For selling the farm, I have suggested he offer to sell it to his dad so that it stays in the family. He says "absolutely not"; I'm not sure why, but his dad is a bit kooky and maybe he feels like it'll somehow have a negative impact on their relationship? Maybe it's just a matter of pride? I truly have no idea and the topic is clearly off limits.

We actually may have a smart solution. A townhouse just became available for VERY cheap ($90k,) so if we can buy that in cash, we could then rent out our house losing about $200/month. We are looking today. That feels like our safest option.

Thank you all for advising, and please feel free to continue. My primary goal is to have my family safe and secure and with as little emotional turmoil happening as possible. I want to live a debt free life, and this unexpected pay cut is certainly causing stress, but luckily we don't feel an emotional bond to our house that makes us want to stay in a situation that we shouldn't. So it's really just a matter of understanding financially what would be the smartest move for us.

Thanks again.

**Barclay** · 06-19-2012, 11:21 AM

That is exactly what I was going to suggest. In many areas rent prices are through the roof and housing prices are near rock bottom. It's a perfect time to scoop up some foreclosure for cheap and rent it out for big bucks or as you described, live in the cheap home and rent yours out.

Also, I would suggest putting in a petition to review your home value for tax re-assessment. A lot of areas are being hit with foreclosures and short sales and those bring down the value. It is not in the best interest of the county to assess home values right now and I'm seeing that they are NOT doing it. I just helped a friend of mine whose home still had a value from 2008 (height of the market). It lowered her taxes from $6800 a year down to $5000.

Goodluck! Do what you need to do to get thru the crunch and then start saving up a nice emergency fund.

**PartyofSix** · 06-19-2012, 11:49 AM

Originally posted by Petunia 100 View Post

Is your lender one of the 5 named in the National Mortgage Settlement? If so, a refi is likely headed your way.

Nope, we aren't included, unfortunately.

If your budget will be short 24k per year, you need to cut 2k per month. A mortgage refi will help, but is not going to be nearly enough all on its own. Where will the rest of the money come from?

Precisely what I'm asking as well. I have no idea. For a while, we'll be living off our savings to make up the difference, but that is only a short-term solution. We'll keep putting in job applications and hopefully something will work out for night/weekend work. But my husband is also starting his doctoral program (which in 3 years will put us in a great spot) and that takes every Saturday from either of us being able to work. Not many places want employees who can't work Saturdays. I'm trying, though!

I agree with the others, you need to look at all of your spending, not just your housing expense. Do you know what you are spending each month? If not, you need to sit down and figure it out ASAP. You may want to use a budgeting tool. I love Mint.com, but any tool which works for you is just fine.

The only area which we could truly cut back is with groceries, and with prices going up, even that is getting more difficult. We don't have a phone bill (have magic jack), we don't use cc (paying off old debts though,) we pay $25/month for cell phone service (total.) We don't have cable, we don't have car payments... we really do try to live within our means... it's just that our means are now a lot less.

Really, it truly comes down to seriously slashing our housing costs or seriously raising our income. Since we can try to raise our income but can only partially control that, I feel like we have to figure out the other half- slashing the cost of housing.

**Petunia 100** · 06-19-2012, 01:21 PM

Originally posted by PartyofSix View Post

The only area which we could truly cut back is with groceries, and with prices going up, even that is getting more difficult. We don't have a phone bill (have magic jack), we don't use cc (paying off old debts though,) we pay $25/month for cell phone service (total.) We don't have cable, we don't have car payments... we really do try to live within our means... it's just that our means are now a lot less.

Really, it truly comes down to seriously slashing our housing costs or seriously raising our income. Since we can try to raise our income but can only partially control that, I feel like we have to figure out the other half- slashing the cost of housing.

Then a less expensive home does sound like a great solution. Where is the 115k in stocks/bonds/mutual funds? Is it inside tax-advantaged accounts?

**LivingAlmostLarge** · 06-19-2012, 01:30 PM

What doctoral program takes 3 years? Is that why he's taking a $28k/year paycut?

What's the budget overall look like? I like jpng suggestion of paying the mortgage down with the investment portfolio to make it manageable. If you refinanced down to $100k what percentage of your income would it be? More in line than 60%?

It doesn't sound like you are spending, but putting it on paper might help others come up with ways to see things more clearly.

Is the farm solely owned by your husband or by multiple family members?

**bullfrogcorner** · 06-21-2012, 05:20 AM

Where are the Grandparents?

Can you get a relative to move in with you? I suggest grandma or grandpa... and they should bring their pension check with them. You'll be doing one another a favor. You'll provide housing and they'll help reduce and or eliminate your shortfall. They'll also get time with their grandchildren. Works for me.

**PartyofSix** · 06-23-2012, 07:29 PM

Originally posted by bullfrogcorner View Post

Can you get a relative to move in with you? I suggest grandma or grandpa... and they should bring their pension check with them. You'll be doing one another a favor. You'll provide housing and they'll help reduce and or eliminate your shortfall. They'll also get time with their grandchildren. Works for me.

Would LOVE to do this if we had someone to move in, but we've got no one in this area, unfortunately. We'd take in a renter if our house were set up for it, but the layout isn't really conducive to renting a room, either. The tenant would be miserable in our noisy abode.

So, I think our best option is to find a home for much cheaper, pay in cash by selling off a mutual fund (or whatever it is that hubby has the money in,) then try to rent out our home here for about $200 less than our mortgage (we couldn't get higher.) Then we could pay the difference ourselves.
If we can't get tenants (in all honesty we should, four bedrooms in this price range are hard to come by and our neighborhood is a nice location,) then we would just have to start defaulting, then try to sell as a short sale.

Does this sound correct? We can buy a house for very little about an hour from here, which means hubby's commute goes way up, but it is the only way that I see us not only staying afloat, but actually being able to get ahead within a few years (because the house we live in would be mortgage free.)

My husband doesn't want to cash in anything in order to buy a house, because he wants that retirement egg to grow. But we don't have another option... we clearly won't stay afloat here, even if somehow we made enough in part-time work, we STILL would be just struggling to stay afloat, and if a car broke down or some other emergency happened, we'd have nothing available and be in serious trouble. I feel like he's got his head buried in the sand, like he thinks by just ignoring the issue it will solve itself. He told me to ask my dad to buy the house and we can rent from him, but 1) I don't have that kind of relationship with my dad to feel comfortable doing that, and 2) if the money is available already by way of mutual fund, so we are paying ourselves, isn't that a more mature decision? If my dad wants to buy a rental and wants tenants, we'll gladly take that route, but I don't feel like it is right to just ask him to buy a house to help us out considering we DO have a way available.

Thank you all for the advice here. This is a very stressful situation, and I really need unbiased opinions who care more about becoming financially free than putting on a good show.

At a loss, needing advice