What options do I have if I cant afford my mortgage and the house just isnt selling?

Question

We bought a house last August and have been trying to sell it since December. No-one seems interested (the house is a little unusual). We cant afford the mortgage (which is one of the reasons we are selling, plus we are expecting a baby in October) and are close to defaulting on payments. We cant drop the price on the house as otherwise we will owe the bank (who are already going to charge us $7,000 as a penalty for repaying early), plus the estate agents fees, settlement fees etc mean we are already selling it at our lowest price. I am getting very depressed at being stuck in a house I really now hate, with what seems like no way out. We really need to find a solution in the next few months. Has anyone any idea whether you can just hand a house back to the lender and walk away? We will already be losing $50,000 in what we have put into the house, but it will be worth it to get my sanity back. Any ideas?

Answer 1

Take ina boarder or two to help stretch your cash until you can get in contact with a person or organisation who can provide sound financial advice.

Answer 2

It would NOT be in your best interest to hand the house back over to the lender. Are you listed with a Real Estate Agency to sell the house? That would be your first step, next talk to your lender and see if they can help you out, some lenders will not require you to pay the mortgage for several months as long as the home is up for sale and then they get paid out of the sale of the home. Worth checking into. Above all do not let the home get foreclosed. It is the worse rating you can have on your credit report. Best Wishes!

Answer 3

You have a few choices,none are too great. Either rent out a room in the house to help pay for the mortgage. Move to a cheap apt and rent out all the rooms if that covers your mortgage.

Or do a short sale which will save your credit and eventually you might be able to buy a home again. An agent will negotiate with the bank to see if they will accept less than is owed on the property. You have to prove financial hardship and its a huge pain. If you do decide to do it, make the decision by tomorrow and get the ball rolling. Once you start going into default on your mortgage you are on the road to foreclosure. short sales are a much better option than foreclosure, but they are a last resort. Try to get family help, or refinance if you have any equity in the home. If you need an agent that specializes I can help you locate one in your city and state.

Answer 4

You are in a rough situation. I could tell you that you should of seen it coming.... that you bought too much house for too little down using a loan that was guaranteed to invite trouble. But, you're not alone. And, though you should of done your homework, it's our governments lack of enforcement and company greed that got you and so many others where you are now.

A program was run on NOW (a PBS show) that covered this very topic. I bet you can order the tape. It's better to contact the bank and let them know you want to work with them to sell the home then it is to start missing payments and also end up selling it for less than its worth. I believe they can let you live in the house as long as you help prepare it for sale, and that they merely want to receive top dollar for it. Because you worked with the bank, you'll have completed your obiligation by being a good steward of the asset they really own. And, they knew the risk they were taking on when you put very little down. A home loan is a "secured" loan. It's "secured" by the house. As such, they own some of the risk. But, not if you don't act in good faith.

Answer 5

You have alot of good answers, so putting my 2 cents worth in also. Talk to your lender, since I am a mortgage broker, and have done short sales for clients, this can be done. But you did not say what your payment was, what your interest rate is now - if you have MI added onto your loan at present time - many factors to consider.

1. Refinance into a LOWER rate - keep your LTV (Loan to value) at or below 80 percent of the appraised value and you will not have MI insurance added onto your loan. Some call it PMI.

2. Refinance and pay off DEBIT and still leave equity into your home. DId your income drop since you purchased the home. I understand from your message you are expecting, so there goes your income (if you are working), so something needs done today.

3. Do a BIG BIG add - in your news paper - YEP it will cost you, but offer a OPEN HOUSE on a Sat and Sun. Have refreshments in. In the ad MENTION that you will be selling it for xxx amt of dollars - you will pay up to 6 percent of the closing costs associated with this loan. Pre-screen ppl that come - 2 years job time, 2 years rental or mortgage history are a added plus to a lender. You could even have a loan officer there to qualify them (take the application, etc) on the spot. When they come to the open house, make sure there is NO clutter laying around....If needed take a picture of the home, and put that in with the add. If ppl know that you are willing to pay all their closing costs, and that they walk into equity from your home. That is a plus. Do this as a For Sale By Owner. Your lender - or any broker can get this done for you.

What people look at:

Structure – Basement, check the foundation for cracks or water marks. Floors, are they level? Does the roof sag?

Water damage – Look for unevenly painted ceiling or wall; mildew odor in basement; signs of re-plastering or re-tiling in just one area of the room.

Water pressure – Flush toilet and turn on both hot and cold water faucets at the same time to test.

Plumbing – Ask what type pipes are installed and their age. If applicable, ask when the septic system was last inspected and cleaned. Stand near the tank to detect odor or soggy ground.

Wiring – A 100-amp system is typical in modern construction and uses a one-inch main line; this can be seen leading to the fuse box. Appliances such as dryer or range require a 220-amp line. Notice if lights flicker or don’t work. Check for electrical outlets . . . usually at least 2 in each room.

Energy efficiency – Ask to check last year’s heating and cooling bills. Determine if proper insulation has been used.

Pests – Be alert for small accumulation of sawdust in the basement. This might indicate an insect problem. Obtain date and results of the last wood-destroying pest inspection.

So if any of the above is in your home, take care of it (ok).

4. Are you by a college? Hospital? Big Manfacturing Plant. Put up flyers -
College - if you plan on renting it out and let someone else make your payments for you.
Hospital - You could take in a border etc, for someone that has a terminal ill family member.
Manfacturing - put up notices that the propety is for sale.

These are just suggestions - but GOOD Luck to you - and may you have a smooth delivery.

Answer 6

You may contact your lender about either a 'short sale' or 'deed in lieu'. However, in either scenario, you will be held financially responsible for the shortage which may occur.

As a side note, I sometimes tire of answering questions such as yours. since so many people seem to think that they can simply 'walk away' from a bad investment.

You must understand that the lender involved is not there to be a charity organization. They expect to be paid according to the terms of your mortgage contract. They have given you 'XXXX' dollars, and have every right to expect that it be repaid according to the terms of the agreement.

Answer 7

This is a bad market that is going down hill. You could try renting it out a room at a time. Or Suzy Orman I think said, cut your price now, or it will never sell. I once built a spec home, and when it did not sell, asked the bank if they would take the deed in lieu of foreclosure, and they did. We signed it over, and I walked away. I wish you better news, really soon. oh, one more thing, try calling the Dave Ramsey radio show he's awsome. www.daveramsey.com

Answer 8

No, you can't just hand it back to the lender and walk away. They'd sell it (eventually, for some price) and you'd be responsible if they didn't get as much as you owe them.

Good luck. You're in a tough spot.

Answer 9

I'm not sure, but maybe you remortgage with another more leanient lender and add insurance, move into a rental space and rent out your current home.