up side down

[mtn]

I'm upside down on my mortgage. I'm thinking of borrowing money from my sep retirement, payoff my second, then refinance my first. Advise???

1st Mortgage - 192000 @ 6%
2nd Mortgage - 35000 @ 9%

Sep Ret - 4.25%

[bjl584]

Don't borrow money from retirement to pay down a mortgage. You will get 0 percent support for that idea here.

Do you have to move? If not, can you just stay put and wait it out until you have positive equity in your home?

[disneysteve]

Are you having trouble making the payments or are you forced to sell for some reason? If you are staying in the house and can afford the payments, being upside down is irrelevant. If you must move, I'd strongly consider renting the house until the value catches up with the mortgage balance. I definitely wouldn't raid my retirement savings to pay down the debt.

[Petunia 100]

Borrowing from a SEP IRA is not allowed. From IRS Publication 560:

Prohibited transaction. If an employee improperly uses his or her SEP-IRA, such as by borrowing money from it, the employee has engaged in a prohibited transaction. In that case, the SEP-IRA will no longer qualify as an IRA. For a list of prohibited transactions, see Prohibited Transactions in chapter 4.

http://www.irs.gov/publications/p560/ch02.html

[Petunia 100]

Have you spoken to your second mortgage lender to see whether or not they will subordinate? If so, you may be able to refi only your first for a better rate. Plenty of people are doing just that. Good luck!

[KTP]

IRA and 401K money is almost 100% protected during a bankruptcy

How will you feel if you borrow or take money from these to pay down an upside down mortgage and then in a couple of years things get worse and you do have to default?

Don't touch money that is protected from creditors!

[mtn]

Don't borrow money from retirement to pay down a mortgage. You will get 0 percent support for that idea here.

Do you have to move? If not, can you just stay put and wait it out until you have positive equity in your home?

Monthly expenses are too high. I'm keep running behind. Borrowing money from my retirement allows me to refinance my 1st and have payment withdrawl fr. pay check. Otherwise short sale is the other option.

Thought???

[disneysteve]

Monthly expenses are too high. I'm keep running behind. Borrowing money from my retirement allows me to refinance my 1st and have payment withdrawl fr. pay check. Otherwise short sale is the other option.

Thought???

As noted, you can't borrow from your SEP. You can cash it out but I'm sure that carries some taxes and penalties.

Can you rent the house for enough to make ends meet?

If you post your full budget, perhaps we can help you find other places to trim expenses.

[bjl584]

Monthly expenses are too high. I'm keep running behind. Borrowing money from my retirement allows me to refinance my 1st and have payment withdrawl fr. pay check. Otherwise short sale is the other option.

Thought???

My thoughts are that there are probably lots of areas in your budget that you can cut back on. Post up a full list of your monthly expenses so we can help.

[JoeP]

Monthly expenses are too high. I'm keep running behind. Borrowing money from my retirement allows me to refinance my 1st and have payment withdrawl fr. pay check. Otherwise short sale is the other option.

Thought???

So the real issue isn't the fact that your house is underwater (which, as others point out, is irrelevant until you are ready to sell), but rather the fact that you are having issues making your monthly payment.

One strategy is to cut back on other expenses (e.g., change cell phone plan, get rid of cable, pay off cars and credit cards, dump whole life insurance, modify your auto/home insurance) to free up more money that can be directed toward your mortgage payment.

You can also sell stuff, and use the proceeds to pay down debt, so you can use that money previously used to service that debt to pay your mortgage.

[woodie96]

Although the IRA is funds you put into it...
As stated earlier, not only are you jeapordizing your future, you are also losing lots of money in the process.

Not seeing a budget so far, the best thing I would recommend is to cut expenses or try to get a part time job to raise the income.

I forget who said it here years ago....But you can't borrow your way out of debt.