I Can’t Afford My Condo. How Can I Move Without Defaulting on my Mortgage?

Posts Tagged ‘Homeownership’

I Can’t Afford My Condo. How Can I Move Without Defaulting on my Mortgage?

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Q: I Bought a Condo in 2006 and My Mortgage is More than it Should Be. I Recently Married and Would Like to Move into a More Spacious House. However, it Would be Difficult to Sell my Condo or Even Rent it for What we Pay Each Month. My Mortgage Lender Doesn’t Do Refi’s. So How Can I Move Without Defaulting on my Mortgage?

A: It sounds like you have little or no equity in your house. I’m guessing that’s the case based on a number of things. You bought your house in 2006, during the “no money down” era, when most homebuyers put little to no down payment for homes. You stated that your mortgage is “more than it should be”. And you indicated that your lender won’t do a refinance. Given all of this, you have a couple of options: One, try to refinance your home with a different lender so that your payments are more affordable. There’s no reason for you to be locked into your current lender – unless you have a loan with a hefty prepayment penalty or something like that. Getting a refi done will take equity in the home and good credit. If you can pull one off, then at least you’re not as cash-strapped.

Moving to a bigger home is another matter entirely. Not only do you need a down payment (that’ll be your equity) and good credit, you also need to come up with closing costs, and to figure out how to first unload your current property. I have no idea what your budget looks like, what you and your spouse’s combined income or expenses are, nor what the real estate market is like in your area. So it’s difficult for me to offer you options that would help you to out of a financial jam. But you haven’t expressed any other financial problems, outside the fact that your mortgage is too high and that you really want to move to a bigger place. Recognize that having a bigger house is a “want” at this point, and not a “need.” If selling or renting are not feasible, I don’t see many options left. You may have to wait until the market turns around and you can sell your existing house in order to come up with the cash necessary for another residence. It would not be wise to buy another house and simply default or “walk away” from your current condo solely because you want a bigger house. If the house was greatly under water – say 25% or more – and you and your husband just couldn’t afford it, maybe because you were unemployed or something, then I might suggest considering your options regarding walking away. But nothing you’ve said to me indicates this. So I think you should try to have a little patience, beautify the home you currently have, and try to ride out this housing downturn. I know it’s not a pretty picture right now. But in the long term you’ll be glad if you wait and buy your new home under the right conditions, with your finances and your credit in tact.

Mortgages: Stricter Lending Guidelines for Condos (nytimes.com)
Why You Should Give Reverse Mortgages Another Look (askamoneyexpert.com)

My Mortgage Company is Giving me the Run Around. I’m in Foreclosure. What Should I Do?

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Author: The Money Coach

Q: My Mortgage Company is Giving me the Run Around. I’m in Foreclosure But Can’t Get a Straight Answer About My Options or Payment Plans. They Say I Owe $5,300, but They Say I Have $2,400 in Money That They Have Not Applied and $3,048 That’s Up in Their System Through Western Union Payment That They’re Sending Back Because It Wasn’t the Right Amount. What Should I Do?

A: My best advice is to keep very detailed records of all your transactions, conversations, payments and all correspondences with your lender. Sometimes, mortgage companies and banks will refuse partial payments. And rather than cash a check that they deem to be less than the full amount due, they’ll return the entire check. It sounds like something to that effect may have happened in your situation – at least with that roughly $3,000 payment they’re allegedly going to return. I noticed that the full amount of money in dispute — that $3,000, plus $2,400 that supposedly has not yet been applied – actually equals a little more than the $5,300 that they claim you owe.

I know it’s frustrating to get the run around and to not have clear answers. But I think you really do know (or should know) if you are in arrears or aren’t. You said you’re in foreclosure. And I assume that’s because you’re behind on your mortgage. Are you behind solely because of these disputed payments, or is there something else going on? If your payment delinquency is only due to these outstanding payments that you’ve made, but have not yet had credited to your account, then I would get some legal help in dealing with this matter. Reach out to a free legal aid clinic in your area, or turn to a reputable foreclosure prevention group for additional help. One good anti-foreclosure group is NeighborWorks (http://www.nw.org).

NeighborWorks is a national non-profit organization that employs a team of mediators to act as go-betweens for lenders and borrowers. NeighborWorks counselors often work out deals for homeowners. They also run the popular toll-free foreclosure prevention line: 888-995-HOPE.

How do I know if someone offering me a mortgage is legitimate or a foreclosure rescue scam? (askthemoneycoach.com)
Foreclosure Rescue Scams: How to Recognize Bogus Mortgage Help (askthemoneycoach.com)

What questions should I ask before agreeing to relocation

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Author: The Money Coach

Q: My Husband is Relocating to Another State. We have Bought a House in Florida. The Market is Down and We Don’t Know What to Do About the House or What Questions to Ask Concerning the Relocation. Any Advice?

A: Start by asking your husband’s employer what relocation benefits, if any, they are willing to provide. Some companies will do just the basics: like paying for moving costs. Others will offer more assistance, like reimbursing you both for house-hunting trips, putting you up in hotels during temporary stays in your new state, or even paying for meals and local transportation during the transition period. With really generous companies, they may offer to fund some of the cost of buying a new home (like providing money for a new down-payment), or may consider buying your existing home, or perhaps reimbursinig you at some level if you have to take a loss to sell it quickly. Relocation packages vary greatly based on the industry, region of the country and, of course, the specific employer involved. But you should ask about any or all of these options. Also inquire about neighborhoods and the cost of living in your new region. Do some basic online research, yet ask your husband’s soon-to-be boss or his colleagues about desirable communities and where there are good schools in your new state. This later area will be of particular importance if you have kids. Ask too about taxes in your new state. Not just property taxes, but also ask whether or not your husband’s employer may consider “grossing up” his income to cover some of the taxes you’ll have to pay if he gets a cash relocation stipend or bonus.

Regarding your existing house, I don’t have to tell you that it’s a buyer’s market – particularly in Florida. Without knowing any specifics about your home or your particular neighborhood, I can only really tell you to price it agressively (i.e. make it attractive to potential buyers) if you want to move quickly. Also, if you need to sell your current home in order to afford a new home (as most people do), then you might as well get the ball rolling and put your home on the market as soon as possible. Ask for referrals or drive around your current neighborhood and look for signs to find a local, experienced real estate agent. Then call that person and have him or her come by your house to do a complete market analysis and tell you what your house is likely worth. Good luck!

What is the Best Way to Payoff Debt?

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Author: The Money Coach

Q: I Had to Take out a Very Large Loan to Pay for One Year of My Son’s College Education. I Anticipate it Taking a Minimum of 5 Years to Repay. I am Also Repaying a HELOC loan. What is the Best Way to Handle This Debt? Should I Try to Pay Them Off as Quickly as Possible Reducing the Money I Would Put Aside for Savings, or Do I Pay What I Can and Make Saving a Priority? I Have a Bit Put Aside for Emergencies, but Nothing Substantial.

A: This is a classic case of “which should I do first – pay debt or save more”? The answer isn’t really a matter of either/or. It’s a question of how to do both simultaneously because that’s the best approach. You need savings to avoid going into debt. After all if you don’t have a cash cushion, the slightest emergency – like a flat tire or a leaky roof – will send you heading for your credit cards. Also, you should pay off debt as soon as possible because you don’t want to pay unnecessary interest charges and be prevented from saving money for other future goals. The good news for your situation is that both of the loans you’ve taken on – school debt for your son, and a home equity line of credit – carry relative modest interest rates. You didn’t say when you got your HELOC, but I assume it’s in the single digits (i.e. less than 10%, and probably significantly less if you got the loan in the past couple years). Ditto for that student loan. So divvy up the available cash you have and work at meeting both objectives: knocking down that student loan balance and your HELOC and also adding consistently, month after month, to your savings nest egg. If I had to prioritize, I would say slash that HELOC debt first and put more emphasis on that than the student loan debt. If it’s a federal loan, the student loan debt may be subsidized (meaning the government is paying the interest on the loan while your son is in school). Lastly, because the healthcare reform bill recently signed into law by President Obama includes student loan reform as well, you can expect college loan costs to come down significantly. For instance, starting in 2014, student loan repayments will be capped at 10% of a borrower’s income. That means even if you can’t pay off that loan in five years, your son can start working on it — and it’ll be relatively affordable for him to do so.

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Posts Tagged ‘Homeownership’