What is the best course of action for dealing with a home that is underwater?
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What is the best course of action for dealing with a home that is underwater?
I bought a home in IL for $282 K with 5% down 5 years ago. I was living there until I got transferred to AZ. Hence I rented the home out. The home is now depreciated and is only showing $200 in the market. Since I had 2 mortgage loans on it and it comes to $1800/month and property tax of $650/month, which makes me spent another $1000 per month on top of the rent to keep the home. What would be the best option for me? Short Sale? Foreclosure? Or any other options to reduce the mortgage payments?
Asked on July 25, 2011 Illinois
Answers:
FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney
Answered 12 years ago | Contributor
If the home is a purchase money loan, meaning the loan you have on it was solely for its purchase and there was no refinance, then potentially if you lose it in a foreclosure, there might not be any recourse to you for any deficiency for the loan amount.
Can you afford the home or not? If you cannot afford it, perhaps consulting with a real estate attoney in your state is an option to discuss a short sale or letting it go into foreclosure and the resulting tax ramifications as to a short sale or a foreclosure.
Another possibility is a loan modifcation with the lenders in place or even a refinance of the loans at a lower interest rate. However, if the loan is refinanced, you most likely lose any purchase money benefits for deficiency purposes if the home is lost in foreclosure or sold in a short sale.
Good luck.
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