Walk on Existing Mortgage??

[tc-sacto]

Scenario
House Value $250,000 (assuming neighbors house short sells...Listed at $250,000, most recent short sale closed for $299,000)
Mortgage $460,000
underwater $210,000

Option 1
keep existing home. (no emotional ties, could take it or leave it)
In 7 years the mortgage would be paid down to $371,343. *Assuming 6.5%annualized growth from here the house would be valued at $393,000. So It takes me aproximately 7 years to get back to breakeven.

Option 2
Buy a nicer home, in better area at current depressed prices with 20% down. After closing, walk on first home.

cons: deal with bad creadit for seven years. (I don't really care as I pay cash for everythnig... except for the house of course.

*(6.5% is the average increase in median family homes from 1968-2008. )

[onewhippedpuppy]

Originally Posted by tc-sacto

cons: deal with bad creadit for seven years. (I don't really care as I pay cash for everythnig... except for the house of course.

And the fact that you signed your name to an agreement and didn't hold up your end of the bargain. Maybe I'm just old fashioned, but that would eat me up inside. Especially if my only excuse was spending more money on a house than it's worth.

[Gooch1971]

Stay and pay. You agreed to the contract and are capable of fullfilling it. Honor your commitment.

[Gooch1971]

Harsh? Maybe. But it is the right thing to do. An UNREALIZED loss on your property is no reason to walk away. Just my opinion.

[onewhippedpuppy]

Originally Posted by tc-sacto

Option 2
Buy a nicer home, in better area at current depressed prices with 20% down. After closing, walk on first home.

I thought on this for a little while, seriously have you no shame? Make the bank take a bath because you made a bad purchase, and in the meantime you PURCHASE ANOTHER HOUSE!? Do you think you deserve another house after you default on a loan and cost your bank over $200k? Personal responsibility really is dead and gone in our society, isn't it?

[Aurel]

How could you buy a second home without selling the first one? If a bank would approve that loan, it means you can afford both mortgages, thus you surely can afford the one you currently have. Option 1 is the right thing to do. Do not make others pay for your bad investment.

[Jim Richards]

Originally Posted by onewhippedpuppy

I thought on this for a little while, seriously have you no shame? Make the bank take a bath because you made a bad purchase, and in the meantime you PURCHASE ANOTHER HOUSE!? Do you think you deserve another house after you default on a loan and cost your bank over $200k? Personal responsibility really is dead and gone in our society, isn't it?

"The bank" is us taxpayers. He comes right out and admits he's considering stealing from us.

[onewhippedpuppy]

Originally Posted by Jim Richards

"The bank" is us taxpayers. He comes right out and admits he's considering stealing from us.

Good point. Pretty much "exhibit A" for why we're all in this mess. Even those of us who meet our commitments every month.

[wcc]

Must be a Liberal! Move this to PARF so we can really speak our minds...... Suck it up and do the right thing to PAY UP! The value will be back after BHO is outta here!

[Neilk]

I think there was an article in the WSJ or NYTimes about banks being on the look out for Scenario 2. They want to make sure the first house sells before letting you buy a new house so they aren't stuck with a bad loan.

#2 is bad karma.

[MT930]

Originally Posted by wcc

Must be a Liberal! Move this to PARF so we can really speak our minds...... Suck it up and do the right thing to PAY UP! The value will be back after BHO is outta here!

Walking on a loan you can pay ?

Shame on you !

Karma will give you the Vulcan dick slap !

[jeffgrant]

I'm kind of amazed that you had the balls to post this, quite frankly.

There IS no option... do what you agreed to do.

[the]

Originally Posted by tc-sacto

*Assuming 6.5%annualized growth from here the house would be valued at $393,000. So It takes me aproximately 7 years to get back to breakeven.


*(6.5% is the average increase in median family homes from 1968-2008. )

That is a completely erroneous assumption. Your house will see no appreciation at all for many years. It is still depreciating, and will continue to do so for some while. Then it will bounce along the bottom for many years.

It will be a long, long time before there is any significant, sustained appreciation. You'll be lucky if that process *starts* 7 years from now. And you'll be starting from a lower number than you are at today, that is a given.

[the]

Given the size of your mortgage and the current value of your house, I assume you bought during The Great Snowman Era.

[jyl]

Answer depends on whether view buying a house as a business decision or as a moral commitment. It is not both.

[cl8ton]

OP I cannot believe you actually posted this thread! Are you serious?

If serious...man up and take responsibility. I am f'n sick and tired of tax dollars helping these situations!
YOU signed the doc, YOU agreed to it, now make it happen!

[tc-sacto]

Originally Posted by jyl

Answer depends on whether view buying a house as a business decision or as a moral commitment. It is not both.

Stricley looking at this as a business decision on a non-recourse loan. The question has made for an Interesting social experiment. Not one lucide well thought out logical argument with facts and figures supporting either option. Plenty of emtional fodder though.

The reason I posted this question is because I'm in the financial fiedl and I am getting this question asked of me more and more. I know the answer I usually tell the client. I just wanted to run a hypo through Pelican to see what others might tell someone.

The:
I discounted the example another 16% to get the starting value ($250k)back to 2.7x income.(the histocial average of median family home values to income...according to Case-Schiller) Then assumed the historical CA. growth rate.

[wcc]

Whatever, how fast can you back pedal....

[UconnTim97]

Obviously you want to let go of some cash, so I propose:

Option #1 because you signed on the dotted line

and buy my car for $10k to get rid of the extra cash of yours, and we both will be happy.

As my tax dollars go to bail out the bank that your loan was defaulted on.

[andrew15]

I don't know why, but using the term 'Interesting social experiment' as a defense always makes the writer 50% more douchy