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07-23-2008, 01:11 PM
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Should I allow my home to fall into foreclosure?
In July of 2006 I purchased a home (to live in, not an investment) for $207k with zero down and a 6.75% fixed rate. Over the past two years my payment has inflated more than $200/month due to rising property taxes and homeowner's insurance. Additionally, I've had to max out my credit cards making repairs (the home was a fixer-upper and in much worse shape than originally thought).
So now I am $30k in credit card debt and $203k with the mortgage. I make enough money to maintain payments, but I'll never get out of debt at this rate and one more disaster will leave me bankrupt. My neighborhood is full of foreclosures and short sales and right now my house, which appriased at $212k when I bought it, appraises at $140k (and people aren't even getting that much). I am thinking of letting the house foreclose and paying off my credit cards. I'll take a hit to my credit, but I think I'll be able to save up more money and buy a better house for less in a few years. Good idea, bad idea?     |
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07-23-2008, 03:50 PM
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If you file bankruptcy you need to also file homestead so that you do not lose your home to the creditors you owe. Or, you can borrow from the equity in your home to pay off your credit cards (consolidation), but then your home mortgage will have the added money to the loan which will add to your monthly payments. To reduce the monthly mortgage payment you can extend the length of the loan, lets say from 20 years to 30 year loan. Some banks offer a drastically low monthly payment that can last for 5 years, after the 5 years you either have to refinance it or sell it, but at least it will give you time so that you do not have to foreclose. Another option would be to rent out any spare bedrooms so that the extra income you get from the tenants will help you financially. Best option would be to sell your home, with the money you get you can pay off all your credit card debts.
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