You can save your home, but should you?

[BrokeOR]

Just an observation...When financial insolvency is your reality but you are own your home (mtg), it is natural to do everything you can to save your home. Many will do everything they can with their bank to modify their loan to a new, lower payment or tack on missed payments at the end of the loan or some forebearance of payments.

This is great IF you are certain that your home is worth what you think it is. But if you bought your home in the last 5 years or if your loan/value is high, the real question you should be asking yourself isn't "can I get my bank to work with me?" but "Should I/". Before you make your final decision to go 13 in order to save your home, I urge you to get a reality check. Make an appointment with a licensed realtor in your area and find out exactly what the value of your home is. Tax assessment values/Zillow/list prices are a very poor determinent as to what your home is really worth. A realtor will give you the straight picture from actual comps pertaining to what homes in your area are really selling for. Then, if you find out that the equity is there or you're even and want to take the ride, great.

But you could be me...I found out that my actual home value in the market today was almost 40% less than what I paid for it and that I was severely underwater with my mortgage- a low, fixed rate and one that I had put the standard 20% down on. After some soul searching, we decided that saving a depreciating asset (sale prices are falling still) that comes with high maintenance costs and that we are still paying on was not smart. We determined that, at the modest appreciation projecttions, it would take us ten years just to get EVEN. At that point, we saw it for what it is: We are nothing but renters with all the attendant obligations of owners.

You may decide otherwise, but no matter what you should arm yourself with accurate information. I'm not a realtor or a lawyer, so take this advice only as intended-benefit of experience.

[steel67]

I find your post very helpful.....something to consider!

[alorth]

I have this problem. My house is worth less than what we owe, and we just re-fi'd last year for the 2nd year in a row. No, we don't have a 2nd, but every last bit of equity was squeezed out 2 years ago, and last year's re-fi was simply for a lower payment and better rate and was done under a program from Chase (who held our mortgage) where they did the re-fi at greatly reduced fees and closing costs because (supposedly) we had never missed any payments and used auto-withdrawal to pay the mortgage every month. They also did the re-fi w/o needing another appraisal...and I feel that if they had required one, we would not have qualified. Such is the case of real estate in Michigan. We will be filing a 13 at some point this year, but we are stuck on what to do with the house. Stay here and keep paying outside the plan...which will likely make the trustee unhappy because of how high the payment is....or just surrender it in the BK. My spouse is especially attached to the home, but I could leave it. I am worried about maintenance costs during the 5 yr. plan. That idea of being essentially a "renter with the obligations of an owner" strikes home. Still giving it some thought.

[ByeByeCCs]

I see what you are saying, but for those of us who have to do a Chapter 13 maybe keeping the home makes sense. I did buy within the last five years and my home is definitely underwater. To get the home, the mortgage company broke it down into two mortgages. The 13 will eliminate the second mortgage and the 1st mortgage is much closer to the current value. I doubt I will ever get the down payment back, but I am confident I will one day be able to get the amount of the first mortgage back. It really is hard to walk away after you put so much money into the home. Walk away in a 13 and the credit card companies get the money you would have put towards the mortgage and you end up living in some shack somewhere.