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Difficult Situation
When I was single, I bought a condo for $150k and put $30k down. I put approx. $5k in improvements while I lived there for 4 years. Then I met my H, we married, and bought a house in just his name.
The condo was obviously not worth selling due to the poor market, so we've been renting it out, but after 2.5 years, it's getting expensive. The condo fees have begun to rise, and we've gone from paying in $70/mo. to $100/mo. (in addition to the rent) just to keep the place. In addition, the rent is admittedly on the strong side as it is, and the last thing I want to do is scare off my tenant and have to go through the rental process yet again. I don't want to raise the rent.
This condo is big time under water. It cannot be refinanced, and even if it could, I couldn't refi under my name since I left my job, and I doubt my H could refi under his name with our mortgage, auto loans, etc. all on him. Also, we would have to refi as a rental property, and the interest rate would be higher anyway...
What to do with this property?
Any insight would be appreciated. TIA!
Re: Difficult Situation
We are in the same situation with our first home, it's something like 50% down from the purchase price and it will be 10 years at least before we break even on the mortgage-home value ratio. The rent we bring in barely covers the mortgage. Unfortunately there are still a lot of people in this boat.
Your options are, either keep doing what you're doing and eat the loss (Remember those fees you are paying are tax-deductible. However, if you're already renting at a loss, I'm betting that like us you are already deducting the maximum amount from the mortgage alone). Or, you can drop the property. There's obviously a lot to consider there...the hit to your credit, whether you will need decent credit to get a loan anytime soon, whether you are ethically okay with it, whether it could even work. For us, VA is a recourse state. Even if we dropped the house the bank could come after us for the difference in the mortgage-vs-sale price, which would likely be substantial. Sucks. To us, if we keep renting the place, at least we are coming out (mostly) neutral.Depending on how much exactly you're losing on the rent I'd probably just keep renting it. It sucks but to me, with young kids, and you a SAHM I'd be really hesistant to hurt my credit to the point of not being able to get a loan for anything.
For instance, we just found out that we have to replace our funace to the tune of about $7,000. We can take the $7,000 out of savings and be left with a scarily small emergency fund, or we can get a low interest loan that our credit union offers. Whatever we decide to do, at least we have the option. With out decent credit, you really don't have much for options.
You could short sale and that will have a slightly less detrimental affect on your credit than a foreclosure, but it will still hurt it quite significantly. You'd be looking at 3-5 years for your credit to bounce back, but it will never really be the same. The short sale will always show up.