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Post by jax on Feb 1, 2011 8:52:32 GMT -5
We bought our house almost 5 years ago, right before the market really tanked here in Northern VA.
We moved up here for the much better job market, but had NO idea that the housing market would tank as badly as it did.
Long story short; we payed 400k for our little house at a bad rate, and it's now worth something around 230k.
We can, of course, refinance once we wander over to the money tree and pull off a huge deposit (actually may be an option for us soon as we both have bonuses soon) but we can't take advantage of any of the government programs to help us.
We owe more than 125% of the value of the house!
My husband has calls in to mortgage brokers, various experts, and one real estate attorney (long story but we got trapped into the bad rate by an unscrupulous mtg company), and we are trying to figure out what to do.
Because right now, just walking away begins to look more & more attractive!
Is there any help for us?
ETA: Our rate's high, because my other half signed a refi with the last house that had a penalty. And we'll suck this up and do what we have to do, just hoping for suggestions. Got a few interesting ones so far.
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jeffreymo
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Post by jeffreymo on Feb 1, 2011 9:08:22 GMT -5
There are probably hundreds of thousands of homeowners in the same boat as you. What has changed from 2006 to 2011 irrespective of the value of your home? Has your incomes changed, the location of your job changed, or do you have a variable rate resetting? Why was the mortage affordable in 2006 and isn't in 2011?
I'm in a similar situation right now though we're probably at 110% LTV and we had some job changes that have resulted in much longer commutes - for this reason we are considering a possible short sale this summer. However if we stay put it's not like the mortgage all of sudden becomes unaffordable because of its assumed value.
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jk70
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Post by jk70 on Feb 1, 2011 9:08:24 GMT -5
jax:
do you like the house and can you afford paying the mortgage without making life miserable (ie, you can't eat out ever b/c your mortgage is so huge)? If so, then you should sit and be fine with it. You're looking at a piece of paper that says certain values and it's worrying you. It's one thing if you have to sell. It's another if you don't but you have an unrealized loss that makes you want to walk away and do more damage to your credit than it's worth.
If you like this place, can afford it (doesn't mean I wouldn't try and refinance if possible), and know you will be in the area for a lot longer than who cares right now. When it comes time that you HAVE to sell, then see where you're at. Don't just sell because it's underwater.
Snerdley's last sentence is a short sale and there would be consequences even if you do that,.
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happyscooter
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Post by happyscooter on Feb 1, 2011 9:15:47 GMT -5
Can you still make the payments?
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Post by cytoglycerine on Feb 1, 2011 9:17:10 GMT -5
People get in these situations because they buy more house than they can afford. I bought a modest house less than 2x our income. To be fair, we don't know what the OPs income is. If her and her husband make $200k/year together (and it always seems like everyone one this board makes that kind of money!), then this house would have been only 2x their income. if one cannot buy a home with 20% down, they can't afford it. To be fair again, we don't know what kind of a down payment OP and her husband put on the house. If the selling price was $400k, they could have put down 20% ($80k) and still easily be underwater today as OP says the value of her house has dropped to about $230k, which is only just a little over half of its original purchase value. OP - What has happened that all of a sudden this mortgage is troublesome and/or unaffordable to you? Did your rate adjust? Has there been a job loss in the family? A new baby on the way? More details would be helpful.  |
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alabamagal
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Post by alabamagal on Feb 1, 2011 9:17:12 GMT -5
If you could afford the house in 2006, you can afford it now. Yes, it sucks that the value is way down. There are no guarantees in life.
Many people have lost lots of on other investments. Stock market crashes can take just as much money out of people's pockets (or more correctly, their net worth). In better times, they make that money back and hopefully even more. Your house is just a bad investment.
I am thankful that my house is not underwater. I purchased it over 20 years ago. The area I live is definitely not a boom area, and all through the 90s and 00s my house probably increaed in value by 20% total. There were many areas that were increasing 20% a year, but I didn't complain about my 1% a year. Many people made large sums of moneys out of housing values. I didn't. Fortunately in my area, we have not seen a big drop. So I am now not "losing" money.
You just bought at the wrong time.
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Post by cytoglycerine on Feb 1, 2011 9:29:03 GMT -5
If you are borrowing up to 125% of the value, you are spending too much money or you cannot afford the house. She didn't actually say she borrowed up to 125% of the home's value. She said she owes 125%. This could have happened without over extending themselves or being irresponsible. Lets say they bought the house at a purchase price of $400k, and put the suggested 20% down. That would put their mortgage at $320k (lets ignore any other potential fees to make it simple). Amortized for 30 years at 7% (OP said their rate is bad, I picked this figure out of the air, it could be different), their mortgage balance would have been paid down to about $300k after 5 years, which is how long OP says they've owned the house. OP also says the house is now only worth $230k, which would mean they owe 130% of the value. Now I don't know that this is the case...OP may be totally irresponsible and borrowed way beyond her means. But, mathematically, with the figures given to us by OP, the situation I described is very possible. We can't say for certain OP has borrowed more than they could afford. |
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Post by jax on Feb 1, 2011 9:29:04 GMT -5
Trying to answer all questions....
Yes, we can just afford it, to the tune of a $3,750 monthly mortgage payment, so it stings and we are trying to figure out how to make it more affordable, if that's possible.
No, we didn't buy more house than we could afford. This house is the smallest in our neighborhood. It's pretty small but the neighborhood is good as are the schools (we have a child). I've seen bigger townhouses!
Do we like it? It's ok. There wasn't much to choose from; we moved from a much less expensive market so we had a cap, and this was the best neighborhood in our cap. And anything less was a hoopty house falling apart.
We live within our means, but have made a new effort to not waste money, to be much, much smarter with it.
We hardly paid anything down (just didn't have it, long story), and got stuck at a 7.5% interest rate. We refinanced our last home, and they made us sign a document stating that we would have to pay a large penalty if we went with another mortgage company within 5 years, even if we sold that house and bought another.
I don't care what the value of this house is. I care about the debt and feel that trying to reduce it, if it's possible, is the smart thing to do.
Had we known this would happen, we'd have rented....
It's frustrating. We pay our taxes, we pay our mortgage, we've struggled to not go under, and we don't qualify for any programs that would help us with a better interest rate because we owe so much on this house and it's value has tanked.
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Post by jax on Feb 1, 2011 9:32:23 GMT -5
I didn't say it did; merely answering the question of whether we bought more than we could afford. We didn't. You are linking back to this thread - what did you want me to read? |
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Post by cytoglycerine on Feb 1, 2011 9:34:00 GMT -5
I don't care what the value of this house is. I care about the debt and feel that trying to reduce it, if it's possible, is the smart thing to do. OP as long as you can still afford the payments, and you're happy enough in the house, forget about what the supposed value is. If the market had gone up or stayed flat instead of going down, you'd still owe just as much today as you do right now. Does the large mortgage balance just freak you out because you don't have an asset worth as least as much to go against it? |
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zibazinski
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Post by zibazinski on Feb 1, 2011 9:34:57 GMT -5
DF and I are looking at homes because our lease is up in April. He wants to spend WAY more than I want to and even though what he wants to spend is a drop in the bucket for him, I keep reminding him of our age, his health, the fact that it is JUST the two of us, and that we want to travel and have another home elsewhere. Little by little he is starting to think my way.
OP, what has changed other than the value of your home? If you both have jobs you can re-finance even if you have to add money to it then so be it. No way should you just walk away because the house isn't worth what you paid for it. So what, that's life. You wouldn't bitch if the house was worth double, would you?
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The J
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Post by The J on Feb 1, 2011 9:37:36 GMT -5
Sometimes when you copy and paste it gives the link back.
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Post by jax on Feb 1, 2011 9:38:33 GMT -5
Whoa guys!
We are just trying to figure out if the smart thing is to refinance or what!
It's expensive up here (but the job market's worth it) and we bought in a good neighborhood, least expensive house we could find, good growing county, and every indication we'd made a good investment.
If we haven't, we haven't - but it would be rather stupid not to investigate every possibility, right?
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Post by jax on Feb 1, 2011 9:40:12 GMT -5
Either I've mis-stated myself (possible) or you are reading too much into this. Either way, you've got the wrong impression. jax - Here is my point. There are choices to make in life. Some people choose to buy a home that is really a stretch and thus spend their lives living from check to check, being stressed out and worried, having to watch every penny, having no fun money, missing some time at work becomes a nightmare and on and on. I can tell you that everything will fine and what you want to hear. Or, i can tell you that you don't have to live like that if you don't want too. And, that life is much more enjoyable when you don't have too. I can tell you that i have made my share of mistakes, lost money, made money but I also knew when it was time to pull the plug. If i lost money, so what, it allowed me to move on with my life. At this point, my home is completely paid off. I own it, i own my cars and I have no debt. I have money in the bank. If I lose my job i could live for quite awhile. I don't live in the Taj Mahal but I have a pretty nice home that I enjoy. In the long run, I would rather live in a tent that I own than a McMansion that I don't. And, i view debt as very stressful and will do anything and everything to get out from under owing anybody. I HATE debt though it is a necessary evil at times. But, that is how I choose to operate. YMMV. |
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Post by jax on Feb 1, 2011 9:43:45 GMT -5
That's because it's a huge mortgage, and the problem is try and reduce it. ;D Why would I refinance for a larger mortgage or rate? We've got a wicked spreadsheet going with all the options we can think of right now, speaking to mortgage brokers and a real estate attorney. So it's a work in progress. I just wondered if anyone here had been through this, or had more ideas. The title of your post is "Huge Mortgage Problem". As for refinancing, i have opinions about that and the constant quest to refinance. You should take out a mortgage and ONLY refi to a lower rate and ONLY refi to the present mortgage and no more. If you refi to MORE, big mistake. |
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Post by cytoglycerine on Feb 1, 2011 9:44:05 GMT -5
We are just trying to figure out if the smart thing is to refinance or what! What are your current terms, and what would be the new mortgage terms, and any fees/costs associated? How much do you owe on the mortgage right now? With those figures available, it's just a matter of number crunching to see which option makes most sense for you. |
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Post by cytoglycerine on Feb 1, 2011 9:48:16 GMT -5
Of course, reading between the lines is half the fun. Even if wrong! LOL - at least you're honest!  |
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jeffreymo
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Post by jeffreymo on Feb 1, 2011 9:50:37 GMT -5
Whoa guys! We are just trying to figure out if the smart thing is to refinance or what! It's expensive up here (but the job market's worth it) and we bought in a good neighborhood, least expensive house we could find, good growing county, and every indication we'd made a good investment. If we haven't, we haven't - but it would be rather stupid not to investigate every possibility, right? I would advise against a refi (since you've already stated that you're not eligible for gov't backed mods/refis) because you'd be putting big buck$ into an asset that you state is depreciating. It sounds like you bought the house strictly as an investment - and in 2006 you felt that the $3700 payment was a good investment, but now the $3700 sounds like a bad investment. If you bought the house because you liked the neighborhood, schools and could afford the payment - nothing has changed in the last 5 years except some of your neighbors are probably paying less than you. If I was in a similar boat I'd look into a short sale, rent an apartment and save the diiference (PITI less Rent) until the credit score was repaired, then buy another house w/ 20% down. |
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Post by cytoglycerine on Feb 1, 2011 9:57:21 GMT -5
Of course. I can talk out of both ends simultaneously!  I like that you're not totally high on yourself |
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Post by jax on Feb 1, 2011 9:59:24 GMT -5
It's actually beginning to look as if we *might* qualify for some of those programs; got a good friend who lives in this neighborhood and knows it well, and is a mortgage agent. She's been running numbers for me and looking at comps all morning. Other than that, our only option may be to refinance when we get our bonuses in a month, and/or increase monthly payments to shorten the life of the loan and save more long run. Whoa guys! We are just trying to figure out if the smart thing is to refinance or what! It's expensive up here (but the job market's worth it) and we bought in a good neighborhood, least expensive house we could find, good growing county, and every indication we'd made a good investment. If we haven't, we haven't - but it would be rather stupid not to investigate every possibility, right? I would advise against a refi (since you've already stated that you're not eligible for gov't backed mods/refis) because you'd be putting big buck$ into an asset that you state is depreciating. It sounds like you bought the house strictly as an investment - and in 2006 you felt that the $3700 payment was a good investment, but now the $3700 sounds like a bad investment. If you bought the house because you liked the neighborhood, schools and could afford the payment - nothing has changed in the last 5 years except some of your neighbors are probably paying less than you. If I was in a similar boat I'd look into a short sale, rent an apartment and save the diiference (PITI less Rent) until the credit score was repaired, then buy another house w/ 20% down. |
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Post by jax on Feb 1, 2011 10:04:54 GMT -5
We owe about $380k on a $400k loan at something like 7.2%. Wish we'd have just rented! But a home seemed like the best idea, and we have 3 big dogs - not very popular with those that rent property, no matter how well behaved they are. This was just a really difficult housing market at the time. There were 5 houses in our range, and literally went from kinda crack house right to decent house, with nothing in between. Never seen anything like it. Debts (other than house) are almost down to nothing now. Paid off the cars early, one last cc to pay off... We do have to tighten our belts, and have been working at that, so we can increase payments. But, is the mortgage for $200+K? If so, what was the purchase price and now what is the principal owed? And, what is the OP's income and other debts and assets? Having a $200K mortgage isn't a problem if you have sufficient income. |
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Post by jax on Feb 1, 2011 10:06:53 GMT -5
No, we discussed refinancing to a shorter term loan and came to the same conclusion. Don't want to be trapped in that. But tightening the belt and throwing more money at the loan - when we put those numbers into the wicked awesome spreadsheet we were blown away by how much more quickly we'd get out from under it! Other than that, our only option may be to refinance when we get our bonuses in a month, and/or increase monthly payments to shorten the life of the loan and save more long run. Read more: notmsnmoney.proboards.com/index.cgi?action=display&board=finance&thread=2693&page=2#ixzz1CigEo66A It is easy to shorten the life of your loan. Make additional payments to principal and a 30 yr mortgage can easily be paid off whenever you want. I WOULD NOT refi to a shorter term, especially if money is tight. |
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jeffreymo
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Post by jeffreymo on Feb 1, 2011 10:11:40 GMT -5
Maybe I'm crazy, but I thought in order to refi, a borrower would have to at least bring the borrowed amount down to 100%LTV.
This would be $150k (380-230) if your "value" is accurate. I would never do this.
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Post by Savoir Faire-Demogague in NJ on Feb 1, 2011 10:16:18 GMT -5
There really is no issue here from what I can see and have read thus far. Your home is underwater, but that only comes into play if you have to move and sell.
If you can continue to pay the scheduled monthly payment and do so, I do not see the problem.
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schildi
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Post by schildi on Feb 1, 2011 10:29:41 GMT -5
jax, your income is > $130K per year, right?
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schildi
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Post by schildi on Feb 1, 2011 10:38:34 GMT -5
If I was in a similar boat I'd look into a short sale, rent an apartment and save the diiference (PITI less Rent) until the credit score was repaired, then buy another house w/ 20% down. I agree. And hopefully learn a lesson is the one important thing I'd add. You'd not want this kind of thing to happen more than once during your life. (I would not even want it once, to be honest) |
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busymom
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Post by busymom on Feb 1, 2011 10:50:29 GMT -5
Don't panic if the value of your home is less than you paid for it. As long as you can afford the payments, and like the house & community you're in, I would not "walk away" from the house, even if you didn't get the best mortgage rate. Even if the banks won't allow you to refinance right now, the situation may change in a year or two. DH & I have a great FICO score, but about a year ago, when we tried to refi an auto loan, we got turned down (for the first time ever!) We just waited, and right now we're working with someone who is happy to refinance our car at a much better deal. Think of your house like buying stocks for the long term--as long as you can afford it, buy and hold! Best of luck!
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zibazinski
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Post by zibazinski on Feb 1, 2011 10:53:18 GMT -5
You're going to be SMITED for that post!!!! Where's that kitten with the SMITE stick?
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busymom
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Post by busymom on Feb 1, 2011 10:59:13 GMT -5
OOOOOooo Snerdley! Check out your FICO score. (I found out one time on our credit report that we "owned" my sister-in-laws house--LOL! Of course, got that taken off my report!)
I like the idea of Jax making extra payments on the house, if they can't refi right now. No debt is good debt!!
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Deleted
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Post by Deleted on Feb 1, 2011 11:00:01 GMT -5
I don't even know what my Fico score is. Didn't you buy 2 houses within the last few years?? The mortgage company didn't tell you your score? |
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