I am 100,000 in negative equity but got a loan mod. Is it worth keeping?

[Darling89]

2% for 5 years, 3% for 6th, 4% for 7th and it caps at 8% for the length of the loan which is25 more years. Is it worth holding onto? I am currently saving about 675.00 a month. I am also in the process of paying off an attorney to file bankruptcy with my $35,000 credit card debt. Is it worth keeping my house with that savings? I do rent out 2 bedrooms separate from my space, which helps me pay for the property and I also get to live in the house. there is a shed on the property I could renovate as well which would help me tremendously as my income has decreased exponentially. Should I keep it or throw it in the bankruptcy?

[IBroke]

I would never consider the "equity-question" the only factor when deciding "keep it or kick it".

We are $300K upside down but the mod made our monthly payment so low that we save more than $1,000/month when looking at a comparable rental. That sealed the deal for us. You need to decide for yourself if you are getting a good "bang for the buck" on your property. It seems that your property has potential.

Every case is different und you should closely look at your numbers. If it's affordable and the price seems right in comparison, there is no need to move out. Are you filing CH13 or 7? Does a 2nd mortgage exist?

[Darling89]

Chapter 7. No second mortgage. I am a musician and having the place practically pay for itself if I renovate the shed makes it seem like it is worth it. and still being able to have a place to keep my stuff and call home, you know? Too bad banks don't just lower the principal, and I do understand every case is individual. I think it's worth it, and I thought so if I got the mod, which I did get. Just wanted some opinions from other folks who may be financially saavy.

[IBroke]

Chapter 7. No second mortgage. I am a musician and having the place practically pay for itself if I renovate the shed makes it seem like it is worth it. and still being able to have a place to keep my stuff and call home, you know? Too bad banks don't just lower the principal, and I do understand every case is individual. I think it's worth it, and I thought so if I got the mod, which I did get. Just wanted some opinions from other folks who may be financially saavy.

Well, if there is no second and you are filing CH7, you are in the driver's seat.

The mortgage itself (the debt, to be exact) will be discharged. Simply DON'T reaffirm and continue making your modified payments. That leaves you all the options in the future.

[Darling89]

What do you mean by "DON'T reaffirm and continue making your modified payments." What does that mean? and how does it leave me options in the future?

[Pandora]

Going to assume that you have balloon payment at the end of your note since it only goes to 25 years, and you're already 100K upside down prior to the mod.

What IBroke is saying is that since you're looking at filing CH. 7 - you will have to include all debts (house included) - and that you can essentially do a "stay and pay" vs. reaffirming the note. This gives you the option to walk away later on should you have to as it will be discharged, but if you reaffirm it, you will be fully liable for it and will not get to walk if needed.

[Darling89]

They allow you to do that? Declare a stay and pay? Actually on the 8th year my payment gets capped at 4.75% for the rest of the term so there is no balloon payment, fortunately, but I like this idea of stay and pay in case the economy gets so bad..... there is no work.

[Darling89]

Thanks to you both for your help.... I take it you think it is worth it for me to stay in this house?

[IBroke]

They allow you to do that? Declare a stay and pay?

Yes. As long as you are making the agreed on monthly payments on time, their hands are tied. The only thing you "lose" is the monthly reporting of this mortgage on your credit-reports since you (legally) don't owe them any more. Some lenders even agree to continue reporting if you authorize them to do so in writing, but I wouldn't count on that. But IMO, that is a small price to pay.

Nobody can force you to reaffirm a mortgage and if you fullfil your part of the agreement, there is nothing they can do about it.

[IBroke]

Thanks to you both for your help.... I take it you think it is worth it for me to stay in this house?

You're welcome!

Looking at the circumstances (incl. CH7 and the fact that you can decide NOT to reaffirm and don't have a 2nd mortgage), I'd clearly say YES!

[Pandora]

They allow you to do that? Declare a stay and pay? Actually on the 8th year my payment gets capped at 4.75% for the rest of the term so there is no balloon payment, fortunately, but I like this idea of stay and pay in case the economy gets so bad..... there is no work.

You're 100K upside down with no 2nd mortgage and you dont have a balloon payment that comes due at year 25? Are you sure about that? Did you have less than 25 years until your home was paid in full and they extended the term?

[Darling89]

How much will that affect my credit score as I start to build my credit back up? Perhaps I should try to get them to agree to continue reporting? I do want to get my credit score back up since the loan mod. made a mess of it. Just curious what you suggest.

[Darling89]

Oh, yes I am sure about that. My loan started in '06. they have me at 2% for 5 years, 3% for yr.6 , 4% for yr. 7 and it caps off at 4.75% for the remaining 18 yrs. Do those numbers not work? I signed the mod to this affect.

[IBroke]

How much will that affect my credit score as I start to build my credit back up? Perhaps I should try to get them to agree to continue reporting? I do want to get my credit score back up since the loan mod. made a mess of it. Just curious what you suggest.

Not by much. There are MANY other ways to get the score back up:

- Get yourself a secured installment-loan
- Obtain 2 (secured) credit-cards
- (Later on), obtain an auto-loan

Keep in mind that the mortgage is still going to stay on your report and is going to be considered a "mortgage-account". Yes, it will be considered "IIB" but if your payment-history wasn't too bad, it is still going to help you.
As I said, it's a good idea to TRY and ASK if they agree on reporting future payments - but DON'T let them lure you into a reaffirmation. It is very likely that they will answer your request by saying "If you want future reporting, you have to reaffirm".

DON'T fall for it! The few potential points for your credit score aren't worth spoiling your BK fresh start and tying yourself to an underwater mortgage again.

[espo1357]

2% for 5 years, 3% for 6th, 4% for 7th and it caps at 8% for the length of the loan which is25 more years. Is it worth holding onto? I am currently saving about 675.00 a month. I am also in the process of paying off an attorney to file bankruptcy with my $35,000 credit card debt. Is it worth keeping my house with that savings? I do rent out 2 bedrooms separate from my space, which helps me pay for the property and I also get to live in the house. there is a shed on the property I could renovate as well which would help me tremendously as my income has decreased exponentially. Should I keep it or throw it in the bankruptcy?

I really don't like the 8% interest rate. That is why it may be better to dump it.
Neg. with the bank to that down to 5% percent, or even 6% and that is the way to go.

However, you have good rental income there, so that is a good reason to stay.

The main part is, do you have a stable occupation, and do you want to stay in that city for 25 years? If yes, then it would seem to make sense to stay.

Also, do you like the home? the area?

There is so much to consider.

I am in the same boat, but my interest rate is goes 2,3,4, and settles at 5. big difference. I am going to keep the home, but my ideas seem to change everyday on this, as I gather more information.

good luck.