zibazinski
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Post by zibazinski on Feb 1, 2011 11:29:06 GMT -5
But you also want to make sure that it is fine.
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phil5185
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Post by phil5185 on Feb 1, 2011 11:39:44 GMT -5
Jax, you may be misunderstanding your loan. A $400k 7.5% loan costs $2797/m. The rest of your $3750/m payment is tax, ins - you pay that even after your house is paid off. At any rate, if it were possible to refi at $400k and 5%, your $3750/m would be about $650/m lower. (I get the feeling that you think it will be much lower?)
Or, if you paid down the $60k or $80k shortfall so that a refi would be doable, that would lower the payment by another $375/m. But at great cost - a better plan would be to retain your ~$70k, invest it at 11%, and grow it to $140,000 over 7 yrs. Meanwhile, the value of the house will likely grow back above the mortgage amount in that timeframe.
But, on future loans or refi's, you dictate what you sign. Not 'the lender made us sign a promise to not go to other lenders for 5 yrs' - geez.
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Clever Username
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Post by Clever Username on Feb 1, 2011 11:48:53 GMT -5
One thing I note in your posts is a victim mentality. This rate was forced upon you. The big bad bank strong armed you. Poor me, pity me, they foisted this upon me.
I'm not even sure what you've described is real. OK, so your first mortgage you took out on your last home... what 10 years ago? Had a pre-payment penalty. You were dumb to sign up for that. But you've voluntarily resigned and resigned and resigned up for that same stupidity.
Yes, maybe you were naive the first time around. But no, you didn't need to refi that first loan. Then when you sold, that's usually an exception to the pre-pay penalty. Even if it was, you should have known you didn't like this bank's tactics and shopped elsewhere. But you didn't. That was your choice. So this is your mortgage. You voluntarily chose this bank at these terms. Sure that rate seems high today, but it's pretty close to what was norm at the time of that closing.
You're underwater, so unless you're bringing cash to the table, you're not going to refi. So that means keep paying the note that you voluntarily chose to pay 5 years ago.
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thyme4change
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Post by thyme4change on Feb 1, 2011 11:54:52 GMT -5
If they bought at $400k and put 20% down and their mortgage was $320k. Let's pretend they got a 30 year at 5.5%. (It doesn't sound like they did - but let's pretend they did everything perfectly according to our direction.)
The house is now worth $230k, but their mortgage has only paid down to $296k.
Let's also assume the market takes a perfectly level annual 4% growth rate starting today.
They would owe around what their house is worth is January 2015 - 4 more years.
If, however, they are able to sell short, and not be required to pay the difference, and they rented for a year or two and then bought a house, they would be ahead by 4% or 8% or 12% by January 2015.
Granted, I know they will have some credit problems - but I would think it was worth investigating. Who knows if they market will increase at all over the next couple of years. They might be underwater on this thing for a decade - even if they did absolutely everything right.
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The J
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Post by The J on Feb 1, 2011 11:59:39 GMT -5
I am sure they checked my scores. And, I am sure it is fine. I never worried about it. I figured if i was paying my bills on time, paying what i owe and not over extending, it was never an issue. Unless there was some fraud or identity theft on your account....
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Deleted
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Post by Deleted on Feb 1, 2011 12:32:25 GMT -5
Short sale and go rent a house that takes dogs.
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zibazinski
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Post by zibazinski on Feb 1, 2011 12:50:02 GMT -5
I have never known a landlord to take large dogs unless the place was already a pit in a bad area. She's right when she says there were no rentals to be had. I even have written into my lease that there are penalties if I find out they have a dog and that their lease is null and void. ALL animals cause damage just like kids do. You CAN discriminate against animals, you cannot against kids. But the rest of the story is a bit over the top. No one FORCED you to do anything and you admitted you didn't have much if any to put down, not that with the drop in home values it'd have made much difference. Fact is anyone that bought 2005-2006 OVERPAID and now you have to deal with it. Pay off principal as you can and it will help.
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Plain Old Petunia
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Post by Plain Old Petunia on Feb 1, 2011 12:50:42 GMT -5
Having said all that, you should put your house up for sale and get out from under this huge debt. If you still owe money after the sale, so be it. Live in a small apt, pay off your debt and start over. Selling low should always be a last resort. Only sell low if you have no other options.
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zibazinski
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Post by zibazinski on Feb 1, 2011 12:52:14 GMT -5
Good luck to just walking away when there is no financial problem other than you are unhappy to owe more than your house is worth.
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Plain Old Petunia
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bloom where you are planted
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Post by Plain Old Petunia on Feb 1, 2011 12:55:45 GMT -5
The real issue isn't the "value". The real issue is the mortgage and your income. What did you pay for the home and do you have any equity? if you bought a $200K home, your mortgage should have been and be a loan of 80% of that or less. The ups and downs of the market are irrelavant. If you bought a home you could afford, then you can afford it. Yes or no? It's like you didn't even read the original post, but are commenting anyway.
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Post by jax on Feb 1, 2011 13:16:00 GMT -5
Seriously? LOL One thing I note in your posts is a victim mentality. This rate was forced upon you. The big bad bank strong armed you. Poor me, pity me, they foisted this upon me. I'm not even sure what you've described is real. OK, so your first mortgage you took out on your last home... what 10 years ago? Had a pre-payment penalty. You were dumb to sign up for that. But you've voluntarily resigned and resigned and resigned up for that same stupidity. Yes, maybe you were naive the first time around. But no, you didn't need to refi that first loan. Then when you sold, that's usually an exception to the pre-pay penalty. Even if it was, you should have known you didn't like this bank's tactics and shopped elsewhere. But you didn't. That was your choice. So this is your mortgage. You voluntarily chose this bank at these terms. Sure that rate seems high today, but it's pretty close to what was norm at the time of that closing. You're underwater, so unless you're bringing cash to the table, you're not going to refi. So that means keep paying the note that you voluntarily chose to pay 5 years ago.
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thyme4change
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Post by thyme4change on Feb 1, 2011 13:18:33 GMT -5
I'm not really clear how you got tricked into a 7-whatever % rate. And how that isn't your fault.
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Post by jax on Feb 1, 2011 13:18:55 GMT -5
A good portion of it is PMI. Got to get out from under that. I do like the idea of investing what could be used as a down payment on the refi. (and I didn't sign the refi on our last home. That was my other half - my name's not on that, or this, mortgage so we are looking at what I could do as well) Jax, you may be misunderstanding your loan. A $400k 7.5% loan costs $2797/m. The rest of your $3750/m payment is tax, ins - you pay that even after your house is paid off. At any rate, if it were possible to refi at $400k and 5%, your $3750/m would be about $650/m lower. (I get the feeling that you think it will be much lower?) Or, if you paid down the $60k or $80k shortfall so that a refi would be doable, that would lower the payment by another $375/m. But at great cost - a better plan would be to retain your ~$70k, invest it at 11%, and grow it to $140,000 over 7 yrs. Meanwhile, the value of the house will likely grow back above the mortgage amount in that timeframe. But, on future loans or refi's, you dictate what you sign. Not 'the lender made us sign a promise to not go to other lenders for 5 yrs' - geez.
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Post by jax on Feb 1, 2011 13:20:50 GMT -5
I'm not really clear on where I said we were tricked, and it wasn't our fault. I'm not really clear how you got tricked into a 7-whatever % rate. And how that isn't your fault.
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stats45
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Post by stats45 on Feb 1, 2011 13:25:54 GMT -5
Jax, I think Phil's advice is very good.
In addition, property values will come back more quickly in different places. If you are in a desirable area around DC, I think you can probably expect a little more bounce back when the market picks up again.
Is this just about the debt number or in part about what you feel you are getting for the debt? I've spoken with a lot of people about this situation and many times they want to get out of their current obligation to move to a better neighborhood, larger home, etc if they are going to be paying $3k or $4k for a mortgage.
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Post by jax on Feb 1, 2011 13:28:40 GMT -5
Yayyy, pity! Fortunately, I've got a good friend who's a broker and is steadily looking up stats etc and contacts for me, so we are trying to uncover all the different options. 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? Jax: I'm not going to offer advice, but sympathy instead. We also bought our house 5 years ago. Since then, the market went through the ENORMOUS roller coaster. Unlike you, today we are about even in our value vs mortgage. But, this is because we refied (THANK GOD!) back in 2007, getting out of a nasty balloon payment loan and away from the ugly mortgage company (we filed a complaint with the BBB). I feel for you and the HUGE mortgage payment you have to come up with monthly. Traditionally we are taught real estate is supposed to be a good investment. With today's market, people are finding out otherwise. Luck to you, Jax!
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Post by jax on Feb 1, 2011 13:30:54 GMT -5
Just the debt, if it's doable. We don't need a larger home, and I'm never moving again anyway. They'll have to bury me in this house. I'm hoping eventually our area will pick back up; it really is a good one. Jax, I think Phil's advice is very good. In addition, property values will come back more quickly in different places. If you are in a desirable area around DC, I think you can probably expect a little more bounce back when the market picks up again. Is this just about the debt number or in part about what you feel you are getting for the debt? I've spoken with a lot of people about this situation and many times they want to get out of their current obligation to move to a better neighborhood, larger home, etc if they are going to be paying $3k or $4k for a mortgage.
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Post by Savoir Faire-Demogague in NJ on Feb 1, 2011 13:30:56 GMT -5
Traditionally we are taught real estate is supposed to be a good investment. With today's market, people are finding out otherwise. Luck to you, Jax!
Much of the middle class, mistakenly and historically believe their residence is an investment. It is not, it is a place to live and a lifestyle choice. Real Estate is an investment when it generates an income stream.
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sil
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Post by sil on Feb 1, 2011 13:42:34 GMT -5
We did a short sale in a non-recourse state. To Zibazinski's point, we did have to write a note about our financial hardship, but we didnt really know what to write because our mortgage was affordable. So we just wrote about all of the normal life stuff that we have been going thru: 2 kids (one with special needs) 2 layoffs we had previously experienced and how the new jobs were far away from our homes and pretty much said we'd like to live closer to work to be able to spend more time with our kids. We presented the bank with an all cash offer for slightly above current market value and the bank accepted our short sale. Reportedly, our lender was extremely easy to work with and the speed our our short sale (about 6 weeks) was not the norm.
Net effects (so far) - We are still employed, we are renting a nice home near our jobs and we are saving money. Our landlord had no issues with our dog (but she's small and lazy) I know our credit score took a major hit (not checking that just yet) but I did just get a new credit card. Just an aside - we do not carry CC debt.
Unless OP is in major financial turmoil or needs to move out of the area, I would not recommend a short sale if they are upside-down by less than 25% loan to value. I also would not recommend a short sale if they could rent the property for near the amount of your mortgage. Short sales are tough and if you aren't careful, they can be risky. Plus giving up a good credit score can haunt you for years.
But if they are upside down by more than 50% and they cannot rent the property to cover their mortgage, this house is going to be an albatross. If they live in a non-recourse state they should do a cost-benefit analysis for various options, including short sale.
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stats45
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Post by stats45 on Feb 1, 2011 13:45:25 GMT -5
I agree, Savior Faire.
At best, owning a home can be a form of forced savings. Because the majority of American households don't have substantial savings and most of their wealth is in their home, they have come to view buying a home as an investment.
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Post by jax on Feb 1, 2011 13:50:23 GMT -5
Yep, if it's not generating income, it's an expense. Traditionally we are taught real estate is supposed to be a good investment. With today's market, people are finding out otherwise. Luck to you, Jax! Much of the middle class, mistakenly and historically believe their residence is an investment. It is not, it is a place to live and a lifestyle choice. Real Estate is an investment when it generates an income stream.
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whoisjohngalt
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Post by whoisjohngalt on Feb 1, 2011 13:54:11 GMT -5
Oh dear Lord, I hope you didn't buy a house based solely on that philosophy Lena
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Deleted
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Post by Deleted on Feb 1, 2011 13:57:34 GMT -5
I have never known a landlord to take large dogs unless the place was already a pit in a bad area. She's right when she says there were no rentals to be had. I even have written into my lease that there are penalties if I find out they have a dog and that their lease is null and void. ALL animals cause damage just like kids do. You CAN discriminate against animals, you cannot against kids. But the rest of the story is a bit over the top. No one FORCED you to do anything and you admitted you didn't have much if any to put down, not that with the drop in home values it'd have made much difference. Fact is anyone that bought 2005-2006 OVERPAID and now you have to deal with it. Pay off principal as you can and it will help. She could find the dogs new homes if that is really the only thing holding them back.
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thyme4change
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Post by thyme4change on Feb 1, 2011 13:57:48 GMT -5
Well - rent is an expense too. If you live in an area where rents and mortgages are equal, there can be a financial advantage to buying. Even if you have to pay maintenance and update the property, your outgo CAN be (depends highly on the area) equal to that of rent each year. If you keep that up for several decades, your outgo over the course of the whole thing might be fairly neutral, but the homeowner would have an asset that can be sold for cash. That cash can be used to pay for the old-age home during retirement.
It doesn't always work that way. Unfortunately, it is a calcuated risk.
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whoisjohngalt
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Post by whoisjohngalt on Feb 1, 2011 14:08:47 GMT -5
I will argue any day of the week that buying a house to live in is a life style choice vs a financial investment. Buying a house bc you can "write off interest" or bc "you own" vs not, is not a good financial decision at all.
Lena
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souldoubt
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Post by souldoubt on Feb 1, 2011 14:26:19 GMT -5
As thyme4change mentions it can be advantageous depending on how rents and mortgages stack up. Where I live they're way out of line and if I were to try and buy the place I'm in now or one comparable to it the cost of the mortgage and HOA fees would be about 27-30% higher than the rent is now.
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Post by Savoir Faire-Demogague in NJ on Feb 1, 2011 14:29:08 GMT -5
Really? Better to own the place you live than pay someone rent and make them money. Further, the interest paid can be written off (for now, til the Fed takes this away from us).
That is correct. There are millions of retirees living in homes they have owned for 40+ years, and are also broke with limited income streams. I've owned three primary residences, and currently own a modest vacation home at the NJ shore. I've been renting since the early 90s, and am much better off for it. I've run the numbers many times in the last 8 years while looking at condos and homes in my area. The numbers do not work. I can rent for $800 per month including utilities. To own a modest condo I'd easily pay nearly double that while forking over at least $80,000 in acquisition costs. There is no basis, tax wise, financially, or investment wise for anything you have said. The only investment real estate is if you are renting it to someone.
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Post by Savoir Faire-Demogague in NJ on Feb 1, 2011 14:30:43 GMT -5
As thyme4change mentions it can be advantageous depending on how rents and mortgages stack up. Where I live they're way out of line and if I were to try and buy the place I'm in now or one comparable to it the cost of the mortgage and HOA fees would be about 27-30% higher than the rent is now.
Another huge variable is local real estate taxes.
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phil5185
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Post by phil5185 on Feb 1, 2011 14:33:10 GMT -5
Traditionally we are taught real estate is supposed to be a good investment. With today's market, people are finding out otherwise. Luck to you, Jax! I haven't found out otherwise - my real estate is worth much more than I paid, our home cost $50k, now worth $300k. The fact that it was 'worth' $600k for a few weeks in 2006 doesn't alter the fact that I made a 6X return. RE always goes up, just not every week, or every month, or every yr. Same with stocks - sometimes the market goes down for a few yrs, sometimes it goes up - but over 25 and 35 yr periods it trends ever upward at 11%/yr.
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TrixAre4Kids
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Post by TrixAre4Kids on Feb 1, 2011 14:34:58 GMT -5
SF, what kind of place can you get for $800 inc utilities? Meaning, what square footage and amenities?
I'm in Seattle which is a totally different market obviously, but I am curious. TIA, Trix
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