I owe more mortgage than what the house is worth in the current market.?

Question

I have a mortgage and a HELOC on a house which I used to purchase a 2nd house in the hope of selling this house within a 3 months time frame. Time is almost up, so I have to either refinance the house and rent it, or short sale, or foreclosure. I am aware of the ramifications of the latter choices especially since I just purchased a second home. I need help in making a decision - and soon!!

House is in California.

I have people tell me to rent it out even if I would be on the negative, say about $500. I think if I do, I might be negative more than that. So is that a good choice? I am looking at the possiblity of deed in lieu of foreclosure which I am afraid might affect my loan on the second house which is basically our primary residence now.

Answer 1

Laws vary for each state. May I ask where the property is located?

Answer 2

Maybe I missed something here, but why would you want to refinance the house to rent it? Once you have a loan in place, there is no need to refinance to enable you to rent it. That would cost you money in closing costs, and besides it ios not your primary residence any more, so nobody is going to lend you everything you need when you owe more than what it is worth.

The mistake was already made with the HELOC and pruchase of the new home, so let's work from where you are now. Foreclosure is not your best choice - it ruins the credit and a saavy mortgage lender could actually go after you legally further because the proceeds of your HELOC were going for use in the purchase of your new home. If you decide to do this, you had better get a d@#& good attorney.

People in this market are looking to qualify for home ownership and can't always do that. Let your agent know that you are willing to do a lease-purchase on your home - this will open it up for many new potential buyers. Here is how it would work in your case, as described...

The buyer/tenant would sign a rental agreement with an option to buy. To have the option in place, they must be willing to put a down payment in place now, as well as pay enough money to make your payments (for them rent plus down payment accumulation). They must be willing to get own financing within 1 to 2 years. This gives them an opportunity to get credit and down payment in place for traditional financing. Their initial down payment goes to your real estate agent for her services.

This keeps the house in your name until the sale is completed, and also keeps you on the hook with the lenderes, but at least you have some money coming in for it

Answer 3

You need to sell the house.

Let's go through each option:

Refinancing - You need to have good credit. If you're able to refinance it, then evaluate your monthly payments against current rents. Part of this calculation is that you have to assume at least a 70% vacancy rate. In California for houses, this might actually be higher. If your monthly payments are less than 70% of your projected rent, then you might want to consider this. However, if you're not making a profit, AND you don't see the house appreciating any time soon, this is a BAD IDEA.

Foreclosure - You get nothing for your house except a terrible ding to your credit that will stay with you for 7 years.

If you have any questions about how it might affect your credit, visit:
http://credit-secrets-bible-review.blogspot.com/

Short sale - You lose some money. Buying a second house to flip was a gamble. Normally, you should only buy a house to flip if you are sure you are making money, for at most 70% of the market rate from a distressed seller. Not having done that, you're bet bet is to get out as quickly as possible. Take it as a lesson learned, and be more careful with your next investment.

Answer 4

I think the best option to do would be to refinance. ZYOu can either get a loan upt o 125% of the value of your primary residence depends upon your credit score of of course. However another solution would be to refinance the second property and take out as much as possible on that property to pay off the debt on your primary. In either case keep this in mind, always protect what you love the most, so if you have family in your house protect your you hang your head at night. SHould you need a free consultation over the phone you can call 877-TLG-6700, and ask for Scott. www. tlgbanking.com is my website.

Answer 5

Join the club, there are millions in it.
Do taking more money out like that second guy suggest sound like a good idea? Its how you got in this position in the first place. why would taking out 125% make sense? All it does it let that mortgage broker make money to pay his bill on the mortgage he owes 125% on. you will be back in the same position in a year when you have gone through that money, just now in a much worse situation. Just hold until you can sell. maybe even let it foreclose, but don't get any more in debt.
Good luck,
RE Agent,
Remax

Answer 6

I help people in your situation. The ideal is to continue paying your mortgage to protect your credit. See if you are able to do this without hurting your finances until the market bounces back up and you can sell.

I don't understand how one loan can affect another home unless you have a bridge loan. E-mail me your details and I'll see what I can do. Since Yahoo doesn't like me giving my e-mail address, just click on my picture and my 360 page has my contact info.

Regards

Answer 7

Now you are on a roll,let take that debit and leverage it out even further, with a jumbo loan. Then you can buy a bridge or some tech stock, how about this stock that will only go up like Enron or worldcom.