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I am upside down on my mortgage and there are so many people say to exclude purposes. I do not see the point if you’re paying someone else mortgage for the next 5 years or until a new home again. I scratch, but I think I should keep my home. I only want to see other people’s ideas on this subject.

5 Thoughts on Why would someone with the intent to exclude if they will eventually rent for the next 5 years?
  1. Reply
    March 3, 2013 at 6:41 am

    You’re correct. It depends on your specific situation, of course, but never go with what “people” say.

  2. Reply
    March 3, 2013 at 6:42 am

    Current rules state that you could buy in as little as 3 years (from the date the current home is out of your name) with an FHA loan, or 4 years for a conventional loan – assuming that the other criteria is good.

    I am not a fan of foreclosure, and I think it should be an absolute last resort (as it used to be). However, I’m also not a fan of bankruptcy and think it should be a last resort as well (and used for items like medical debt that you couldn’t control). Basically, I believe that you should honor your commitments if at all possible. Situations do arise where foreclosure cannot be helped, but too many people are choosing to foreclose simply because their home has lost value, even though they can still afford the payments. If you can currently keep up with your mortgage payments… I would try to keep the house… the housing market will recover eventually and prices will start going up again. Could you pick up a second part-time job to bring in a little more money to help ease the financial stress of the home? Something as small as working another 10-15 hours weekly, or doing home repairs or mowing for others a few times monthly could bring in another couple hundred dollars that might ease the financial strain. Are there any non-necessities that you could cut so that could have more money available for the mortgage? Cable, lower cell phone plan, eating out, electronics, shopping (for non-essentials), etc… one or more of these might free up a lot of money monthly. You might also check to make sure you’re getting the best deal on insurance.

    Good luck to you, it is a difficult situation. Renting is bad, especially if you could find a cheap place to rent for the next few years and save the difference. Unfortunately, too many people go through foreclosure and then rent a cheaper place and never save a dime — what a waste.

  3. Reply
    March 3, 2013 at 6:57 am

    There are a lot of variables that impact your answer which you and only you need to factor.

    How MUCH are you upside down
    What is the rate at which the local market is recovering,

    From that you can somewhat project when you will (if ever) be rightside up

    At that point in time how much will you have paid for a house of what value?
    How old will the house be….factor in upkeep and at least one or two major repairs

    and for comparison..

    If you stop paying now….figure a year of free rent and then you must move out.
    What are your estimated rental costs for the next seven years (because your credit will be tanked)
    What are any other costs or effects related to your foreclosure.
    How much money will you save (since renting is generally cheaper then owning) less any tax deductions.

    Carry those costs until the same breake even date in the first example.. now examine which one was/is a better choice

  4. Reply
    March 3, 2013 at 7:53 am

    It’s called a strategic default; It’s a very fact specific, whether a person should consider the option or not

    For insistence: If a person home is underwater at 35% below the current loan value and the loan is non-recourse, it may be a prudent business decision to default on the loan
    In general the housing market is still in decline, some markets have temporary leveled or even showed a slight uptick in a certain month in prices, but the experts believe home prices will decline well into 2012 under the current facts:

    Now if the Fed’s get rid of the mortgage deduction; or scale down Freddie and Fannie programs pushing for more private companies; or inflation creeps in and interest rates rise, and unemployment stays around current numbers, housing prices will turn downward

    So then the question becomes if my home in this current market is 35% below, when will the home have positive equity? Could be 15 years easily

    Prices need to stabilized which may not happen until 2013, then increase more line with the old days not the boom so maybe 3% a year, assuming none of the other factors happen to effect the market

    In that case since the loan is non-recourse the person can walk away own nothing to the lender, and within 3/5 years looking to be a home owner again?

  5. Reply
    R P
    March 3, 2013 at 7:54 am

    If you are able to make your house payments, please continue to do so. Kudos to you for wanting to honor the legal commitment & promise you made to repay the lender when you signed those mortgage papers.

    IMO – people who default because they are upside down in their mortgage are contributing to the housing problem. Not only that, but their word doesn’t mean anything; where else are their morals lacking?

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