I need expert advice- please

Patrick · #1 (**permalink**) 07-28-2010, 10:39 PM

Thank you in advance for your help. Recently, I was out of work for almost a year. Paid my mortgage but ramped up the home equity. My home is worth 500K, give or take, but we now owe about 510K, mortgage and home equity combined. Our mortgage and equity is near 65% of our take home and we would like to move and get a much smaller mortgage. Do I have to talk to the lender about a short sale or are there other options available?

finnster · #2 (**permalink**) 08-04-2010, 07:53 AM

Not sure I understand your situation. Are you saying that your house is worth 500K but your borrowings secured on it are 510K? If that's the case you are in negative equity and will need to speak to your lender to sort out a solution. Selling the house and downsizing will help.

DavidBibby · #3 (**permalink**) 08-04-2010, 09:37 AM

I understand at 65% of net income you are really feeling a pinch. I don't think a short sale is the right call, as that may mess up your chances of obtaining a smaller mortgage in a smaller home.

All this depends on whether or not you want to even KEEP the house you're in. If you're wanting to keep the house.. then find ways to cut ALL your other expenses so that living on the remaining 35% net income is bearable. Do this while you look for ways to increase your income.

However, If you want to downsize.. then sell the house at slightly under it's value so that you can attract some buyers.

Yes you still have to pay the difference between what you owe and was you sold the house for.. but that's a lot more manageable than having to pay the whole $510k.
The lenders would most likely change the payment arrangements on the difference, giving you some financial relief.

The "Short Sale" option... in which the lender FORGIVES the difference, will hurt your credit and could possible prevent you from getting another mortgage for a while.
You STILL have to find a buyer on the "Short Sale" option.

Good Luck!

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