Question. (Assume u can't sell your current home anywhere near what U owe)

Let's say u live in your DREAM house and have no bills except your house. U owe a balance of $390,000 on your house. What would u do, if another house (foreclosure) in a similiar neigborhood could be purchased for $200,000 that is just as nice or better that the house u currently have? If u had the $200,000 cash in the bank, would u;

A: purchase the newer home and walk away from your current house netting u $190K plus all of the interest you owe with the 20 years left 2 pay on the house.

B: Stay in your current home

C: Buy the other house for cash and lease it to someone. The return you get from that should be better than what you're getting from the bank right now.

This is a great example why we need to avert as many foreclosures as possible by modifying loans. All the foreclosures are going to do is drive down the values of EVERYONE'S homes. And then some people are going to walk away from their home because they're underwater, which will continue the vicious cycle of downward home values.

RodeoSchro said:

Good answer but that leave u with principal and interest on the $390K u still owe on the original house. No way a lease is going 2 make that up.

Graycap23 said:

No, he isn't suggesting that you leave the old house or stop paying on it.

but if you have $200,000 sitting around, the lease money on the $200,000 house is a better investment than the money just sitting in the bank.

So assuming you can still make the payments on the old house, the new one is still a good investment.

NDRU said:

I'm suggesting that that may the best option.....

Graycap23 said:

If the old mortgage is too much to handle, maybe. I have heard of people doing what you suggested--getting the new house, and then walking away from the old one.

But foreclosure will mess w/your credit. I wouldn't do it unless it was necessary. I definitely wouldn't do it as an investment or as a chance to one-up the system.

NDRU said:

That credit rating thing is just another way 2 "control" people.

Graycap23 said:

If you think you never need another loan for a car, home (you're sure you want to stay in the new house?), business, etc, then yeah I would agree. Loans are a trap to keep you paying far more than the purchase price.

It's risky, but maybe you buy the $200,000 home & walk away from credit entirely.

NDRU said:

Thta's what I'm saying.....

Well, this whole loan modification program which was passed in the stimulus package was supposed to help those homeowners who were paying off their mortgages but found themselves underwater. Unfortunately, a lot of banks are making homeowners jump through even more hoops to get their loan modified. And in some cases the banks aren't foreclosing quickly on a lot of homes because they already have too many properties taken back that they cannot sell. If they were forced to foreclose immediately on all of the homes in default, the banks would go under themselves.

Personally, I can't believe someone who purchased a home would just "walk away" from it. You are responsible for that purchase - and for your debt. The thought that I, a taxpayer and citizen who handles her finances responsibly, would end up footing the bill for any part of someone else's lack of responsibility makes me physically ill.

Genesia said:

I would agree with u in general, but when u look at what banks and other financial institutions are doing 2 consumers.....consumers had better WAKE up.

Graycap23 said:

How are you paying it now?

Genesia said:

I am sorry to hear that you have been sick since the day George W. Bush turned a surplus into a deficit. Hope you feel better soon.

my parents just HAD to walk away from their house, my dad's office closed, and in-order to keep a job he had to transfer to another state with the same company. and they were unable to sale their house, they owe more on it then what they can sell it for. so, they had no choice, now they'll be renting an apt., it about killed my mom to have to walk away as that was her little dream house, but they really just had no other way.

RodeoSchro said:

This is not 4 me. It's just a question based on situations I am finding people in. In some cases they can pay but really just don't want 2. I can't say I'm disagreeing with them.

Graycap23 said:

Not paying because you just don't want to is bogus. I would not respect anyone that could pay but defaulted on purpose.

RodeoSchro said:

As bogus as credit card companies charging people 29% interest? As people owing more on their homes that what they are worth? As banks charging $35.00 for overdrafts of $.25 cents? Hummmmm.....

Graycap23 said:

Is the mortgage company charging these people 29% interest? Did the mortgage company cause the decline in home values? Is the mortgage company charging $35.00 for overdrafts of $.25 cents? Hummmmm.....

Two wrongs do not make a right.

I would buy the 2nd house and lease it out. assuming you are able to continue to pay on your current home, the 2nd one should pay for itself in about 10 years!

RodeoSchro said:

Does the mortage company own the bank that is doing these things 2 consumers?

myfavorite said:

...oh i'm the only one being shitty!...