This is a long post so bear with me. My wife and I are in a bit of a pickle with our house. We bought our house in 2006. Do to a job change, we are in the process of moving to a new city. The job is an excellent improvement (better pay, better work, better city, closer to family, etc). But we are stuck trying to get rid of the house. By my calculation, we are upside down to the tune of $20,000 - $40,000, depending on sale price, realtor fees, etc. Zillow actually says we have $6,000 in equity, but I think Zillow is wrong and, in any event, doesn’t account for the closing expenses. I’ve watched what similar houses are listed and selling for and think we’ll be lucky to walk away without bringing at least $25,000 to the table in this market.
Problem is, we do not have $25,000 in ready cash, and we will not cash out our IRAs or 401K. We have only $5-6,000 in ready cash. I imagine we could have $8-10,000 by year end, but that’s only a guess.
We have considered (and still are considering) renting it out, but similar rentals in the area go for $800-$1100/month, while our monthly mortgage payments are $1600. Of our $1600 payment, about $250 goes to principal while $1350 goes to interest, insurance, and taxes. So we would eat at least $300-$550 a month renting it out (and that doesn’t even consider the variable expenses of being a landlord, esp. from two hours away). Our budget is incredibly tight right now, with significant student loan payments and my wife not working until next August. The house is 50 years old, but has given us virtually no problems for the two years we have been there.
We have also also considered (and are still considering) “walking away.” The thought of it makes me sick, but in my state there are no deficiency judgments following a residential trust deed foreclosure. Part of me thinks the credit hit will be more manageable than the $40,000 +/- cash hit. But there are some legal risks to walking away. First, we have two trust deeds (an 80/20). Even if 1st position forecloses, the 2nd position may elect to sue us on the note rather than foreclose. In that event we’d have a foreclosure on our record AND still be on the hook for $40,000. I suspect the 2nd position will not sue us (unless they learn what my new income is . . .), but it’s a risk.
We’ve also considered asking for a deed in lieu or short sale, but this too is complicated greatly by the fact that we have two trust deeds.
I know this is an early retirement forum filled with people who are in a much better financial position than me. And I know the best answer is "I never should have bought a house to begin with." But I am still a young dreamer, and I know that many of you have been in similar, if not worse, positions when you were a young pup like myself. This is not strictly a retirement question, but it is a money question and this forum has the best collective knowledge of personal finance I've seen on the internet. I appreciate your candid advice.
Problem is, we do not have $25,000 in ready cash, and we will not cash out our IRAs or 401K. We have only $5-6,000 in ready cash. I imagine we could have $8-10,000 by year end, but that’s only a guess.
We have considered (and still are considering) renting it out, but similar rentals in the area go for $800-$1100/month, while our monthly mortgage payments are $1600. Of our $1600 payment, about $250 goes to principal while $1350 goes to interest, insurance, and taxes. So we would eat at least $300-$550 a month renting it out (and that doesn’t even consider the variable expenses of being a landlord, esp. from two hours away). Our budget is incredibly tight right now, with significant student loan payments and my wife not working until next August. The house is 50 years old, but has given us virtually no problems for the two years we have been there.
We have also also considered (and are still considering) “walking away.” The thought of it makes me sick, but in my state there are no deficiency judgments following a residential trust deed foreclosure. Part of me thinks the credit hit will be more manageable than the $40,000 +/- cash hit. But there are some legal risks to walking away. First, we have two trust deeds (an 80/20). Even if 1st position forecloses, the 2nd position may elect to sue us on the note rather than foreclose. In that event we’d have a foreclosure on our record AND still be on the hook for $40,000. I suspect the 2nd position will not sue us (unless they learn what my new income is . . .), but it’s a risk.
We’ve also considered asking for a deed in lieu or short sale, but this too is complicated greatly by the fact that we have two trust deeds.
I know this is an early retirement forum filled with people who are in a much better financial position than me. And I know the best answer is "I never should have bought a house to begin with." But I am still a young dreamer, and I know that many of you have been in similar, if not worse, positions when you were a young pup like myself. This is not strictly a retirement question, but it is a money question and this forum has the best collective knowledge of personal finance I've seen on the internet. I appreciate your candid advice.
