Question for the housing minded

[Warhammer]

I have a job opportunity that has arisen. I am trying to get my ducks in a row regarding bills, moving costs, etc.

The big issue appears to be our mortgage. We bought our house 10 years ago and we will take a minimum hit of $25 k on it. We earn enough to pay for a home more than three times what our home is currently worth that, but what are our options for getting out from that one time cash hit?

[Marmel]

I have a job opportunity that has arisen. I am trying to get my ducks in a row regarding bills, moving costs, etc.

The big issue appears to be our mortgage. We bought our house 10 years ago and we will take a minimum hit of $25 k on it. We earn enough to pay for a home more than three times what our home is currently worth that, but what are our options for getting out from that one time cash hit?

I know more than a handful of people who are renting out homes that they do not want to take that kind of hit on.

[Swaggs]

Can you bring any cash to the table?

If you can't pay your way out of your existing mortgage, I'm guessing your best bet would be to rent your current home (and overpay the mortgage and/or hope the market improves enough to get you out from being buried) and rent in your new town until you can afford to buy again.

[Warhammer]

Yes, I can bring some cash to the table. I could also crack the wife's 401K if needed.

The problem is the magnitude of the amount. I'd love to be able to roll it into any new mortgage, but doubt that is possible in today's market.

[TroyF]

I have a job opportunity that has arisen. I am trying to get my ducks in a row regarding bills, moving costs, etc.

The big issue appears to be our mortgage. We bought our house 10 years ago and we will take a minimum hit of $25 k on it. We earn enough to pay for a home more than three times what our home is currently worth that, but what are our options for getting out from that one time cash hit?


When we purchased our house in CO a little over a year ago, i had to rent out my condo as I was 25k+ upside down on it.

As I traveled a ton and didn't want to burden my wife with the management, I hired a property management company. They get 1/2 of the first months rent for any new tenant and 8% a month and a very reasonable fee on labor if something goes wrong. I get to not worry about collecting the rent, knowing the laws and having to run over at 2 AM if there is a problem.

Thankfully, I have a renter with a lease through December. I can now go purchase a house and can move on. If something horrific happens, I can always move back to the condo next year. I could make the payments on a 30k salary so it wouldn't be hard to do that if I had to. I lose about $250 a month on it, but I can live with that. My only real fear is a renter destroying the place beyond belief, but I think I can withstand it a few years and hope the market moves back in my direction.

It is next to impossible to refinance a property you are upside down on. If you give the house back without filing for bankruptcy, you will pay dearly in taxes and it will still be a hit on your credit. You file for bankruptcy, forget buying a house for awhile. You buy a house and then let the other one go, it could cost you bigtime depending on the state. Many bankruptcy judges will look at that as intentional fraud and not allow the debt to be absolved.

I guess what I'm trying to say is, there is no easy way out here. There are pitfalls and costs to whatever you decide to do. If you are stuck, call a lawyer and get professional advice (I did) You will not regret it in the long run.

Good luck with whatever you decide.

[Desnudo]

Yes, I can bring some cash to the table. I could also crack the wife's 401K if needed.

The problem is the magnitude of the amount. I'd love to be able to roll it into any new mortgage, but doubt that is possible in today's market.

I would not crack the 401k under any circumstances...

Otherwise, why is it critical that you buy in the new location?

[GoldenEagle]

I am surprised you would take a 25k hit in the Memphis market. We didn't have the ups and downs that California/Nevada/Florida did.

[JonInMiddleGA]

I am surprised you would take a 25k hit in the Memphis market. We didn't have the ups and downs that California/Nevada/Florida did.

I thought Memphis was like most places, it was just downs? Article from May 2012 (http://www.bizjournals.com/memphis/news/2012/05/02/memphis-still-fourth-lowest-performing.html), 2nd highest percentage of bank sales in the country (trailing only Detroit) and over 10% of value lost just between '11 & '12.

Not kicking dirt at ya, FTR, just trying to reconcile the discrepancy.

[Logan]

My fiancee's sister and her husband are about $40K under on their condo in NJ. They just had their bid accepted on a house nearly 2x mortgage amount of their current condo, closing in April. They're planning on renting out the condo. They'll lose a bit monthly as some here are describing but it beats dumping all that cash in at this point.

[Lathum]

Will the new employer absorb some of the hit since you are relocating?

We just relocated for my wifes company and they will cover any loss up to 90%. Made selling a lot easier.

[GoldenEagle]

I thought Memphis was like most places, it was just downs? Article from May 2012 (http://www.bizjournals.com/memphis/news/2012/05/02/memphis-still-fourth-lowest-performing.html), 2nd highest percentage of bank sales in the country (trailing only Detroit) and over 10% of value lost just between '11 & '12.

Not kicking dirt at ya, FTR, just trying to reconcile the discrepancy.

I don't know exactly where WarHammer lives, but I think that is mostly in the poorer parts of the city. If he has a home in Collierville, Germantown, Desoto County, etc. then I wouldn't think he would be taking that much of a hit at all.

Of course, he would have a 500k home and taking just a 5 percent hit which we would be totally expected.

[Warhammer]

The house is out in the part of Cordova that was not annexed. The city has played games with the area and never annexed and between their threats to annex (which never came through) and the economy we lost a good chunk of value on the home. People that got out did, my wife and I held on due to not wanting to dump the house for a loss. We expected prices to come back up, they never did.

[kcchief19]

When you're talking about taking a hit, are you talking about being underwater on your mortgage (owe more than the home is worth) or the home being worth $25,000 less than you bought it? Those are completely different things.

If you're underwater on the mortgage, financially it may make sense to try to rent the property in the short-term if there are signs the value may come back. The numbers may not add up if you have to contract with a management company and the monthly income won't offset your mortgage payment. It will also hamper your ability to get financing for a second home if that's what you want to do.

If the home is simply worth less than you paid for it, you're probably better off taking the hit. It's no different than moving money from an under performing stock to a blue chip. Take the loss and move on to a better investment.

[Warhammer]

We're underwater.

[GoldenEagle]

That is a tough break. That area was probably pretty decent when you bought, but the crime kind of moved that way. I saw the news yesterday where a guy was killed in a nice home which I am assuming is pretty close to yours.

[Butter]

I know more than a handful of people who are renting out homes that they do not want to take that kind of hit on.

Like me. Renting has been a fun 5 month experience so far.

[Warhammer]

That is a tough break. That area was probably pretty decent when you bought, but the crime kind of moved that way. I saw the news yesterday where a guy was killed in a nice home which I am assuming is pretty close to yours.

What killed us, was the back part of the subdivision was supposed to be cleared and re-developed. When the city tried to annex us 9-10 years ahead of schedule, the developers all bailed. That area dragged down property values as well as the people that got out of the neighborhood because the city was going to come in etc., etc., etc. City was going to annex twice, and then the economy tanked.