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Thu 24 Jun, 2010 02:34 pm
Ok, lets say you are inflicted with a protestant ethic. (it's not really your fault, it's almost genetic) anyway you live in Studio City California and have a mortgage of $450,000 and your house is worth $200,000. The bank refuses to refi. you can't sell because you will still owe $250,000. Do you walk out on the debt?
@dyslexia,
But wouldn't your Protestant Ethic have prevented you from buying
something you could not pay for?
[Picture a look of wide-eyed innocence as I ask this.]
@George,
every "professional" you asked (finance adviser) realtor, banker etc told you "good investment-can't go wrong" then (after closing) the bubble burst and you got down-sized.
So have you been making the payments? Still employed?
If so, stay still. Things will come back.
If not, consider a short sale. Have a relative buy your house for the $200 grand and you rent from him/her.
@dyslexia,
I feel for anyone who goes through this, having had my own house repossesed and being thrown out onto the streets with a wife, a child and a dog.
Is there anychance you could take in a lodger, or maybe even declare yourself bankrupt?.
Things turned out fine for me in the end, I hope that things turn out fine you also.
Best wish's.
@dyslexia,
If you took out a mortgage you could afford, then you should pay it.
If you took out a mortgage you could not afford, whose fault is that?
@dyslexia,
It happened to former neighbours of mine in the last bubble/burst. They both ended up having to go back to work to keep the payments up. When the house value made it back to about 80% of what they'd originally paid, they sold up and moved to a less expensive community. Took 'em about 16 years. Pain in the patoot.
@dyslexia,
dyslexia wrote:
Ok, lets say you are inflicted with a protestant ethic. (it's not really your fault, it's almost genetic) anyway you live in Studio City California and have a mortgage of $450,000 and your house is worth $200,000. The bank refuses to refi. you can't sell because you will still owe $250,000. Do you walk out on the debt?
No.
The fact that your house, currently, is worth less than you owe, in no way impedes your ability to pay off your debt.
If the market turned tomorrow and your house was suddenly worth $500,000 I doubt that you would consider there was any ethical question to consider about the bank demanding you pay your debt in full or give the place up.
@George,
I would say the opposite is true. The Protestant so-called ethic would probably prompt you to buy an expensive house as a status symbol.
More importantly, however, is the fact that the statement that dyslexia made is a a snapshot of the end of the process . . . not the beginning. The house was affordable when purchased. We can blame the Protestant ethic for spinning the economy out of control.
@ABYA,
Bankruptcy is funny. Unless the owner of the home has credit card debt, he probably can not declare bankruptcy. I looked into bankruptcy, which is a sort of reward for the irresponsible.
@George,
Wrong point of view. The mortgage was probably affordable when taken out. This is CA.
@plainoldme,
the mortgage pmt was $2761 at closing, it is currently $4778.
An ARM, or is that a balloon payment?
@Eva,
arm. this thread is only a possible scenario, imaginary facts.
Oh, good! That makes me feel much better, knowing this is hypothetical.
This type of scenario is always what has kept me away from ARMs, btw. True, I'm not much of a risk taker, but the very idea of committing myself to payments in unknown amounts, which I would have no control over, has always seemed ludicrous.
@plainoldme,
plainoldme wrote:Wrong point of view. The mortgage was probably affordable when taken
out. This is CA.
The first set of payments were affordable.
But the mortgage includes all the payments.
Continue to live in the house, rent out the extra bedroom(s)
@ehBeth,
Canada? I don't think Canadian law lets you walk away and leave the lender without recourse. That could change the decision, though there are people who pay debts in spite of the law.
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