Could defaulting on a mortgage improve this situation?

Caitlin - posted on 09/16/2010 ( 7 moms have responded )

1,915

5

172

I wasn't really considering doing this for obvious reasons, but somehow I failed to see a downside.. please dont' judge.

My husband and I are in school, he is finishing summer 2011, I have 3 years left (part-time). We live in a small bungalow that is evaluated (municipal evaluation) at 145k. We owe pretty much 147k on it. The place is in such disrepair, we started one timy renovation, and uncovered a pandoras box of problems. We cannot legally close it back up and pretend we didn't know about them (electrical, plumbing, structural, mold..). The house has been on the market for a long while now, the real estate agents kind of gave up on it, people just aren't looking for a crappy house like this these days when they can get a much nicer one for just a little bit more, but it seems stupid to accept less than we owe for the place, I don't want to pay for a house that we don't have.

I've cut back almost everything I can in the house, I can't cut back the internet, my courses are all online, so I need the connection. The phone is being cancelled, the TV as well, we only have 1 car between us for everything we need to do (we both work full time). I went back to work because my maternity leave wasn't bringing in enough money to pay bills, but even with that we are still a few months behind on everything, and I can't think of anything else to cut out of our spending, i've drawn up a budget and we have 30-40$ a month that we spend on "us" which usually ends up going for a new pair of shoes/boots for one of the girls because apparently they need food as well.

I have to get rid of this house, it's a money pit, it's costing us an insane amount of money for upkeep, and i've put in about 10k in needed repairs/renovations in the last 2 years, and that's material cost alone, because I do all the work myself (I'm a carpenter) (well - except when I got the breaker box installed to replace our sketchy fuse panel). I know the place isn't goign to sell any time soon and our credit is already in the crapper because we get phone calls almost every week (most of the time twice a week) reminding us we have an outstanding balance on whatever. The credit cards are maxed out, and whenever we seem to be getting a handle on things, either we need to repair the car or we need to buy some medications for our oldest (the last bill was 215$.. we get some back form insurance, but not enough..).

I'd love to move back into town, even in an appartment paying rent - it would be less per month than our mortgage and we could rely on public transit to get to and from places, not always relying on the van, which is a killer in gas (that's on loan as well, we don't own it or i'd sell and downsize). I have dreams of just walking out one morning with a uhaul full of the stuff I need and leaving - changing my bank account deposit from work so that the bank could just have the damn hunk of junk back - I don't want it anymore.

*sigh* I know some of you have most likely ben through some hard times - so any advice out there or words of encouragement? I know once my husband gets his degree, he can get a better paying job, but I just don't know how we will last almost a year on what we have..

MOST HELPFUL POSTS

Tracey - posted on 09/17/2010

1,094

2

58

In the UK you can get an IVA which is a legally binding agreement between you and your creditors. You agree to make a set payment each month for 5 years after which any amount outstanding is written off, and the creditors agree to freeze all interest and charges and do not contact you again.
Don't know if this is available where you are but would be worth looking into.

Sharon - posted on 09/16/2010

11,585

12

1315

You talk to a financial counselor or advisor. It will cost you but it will help you make a good decision.

You're talking about abandoning the house? Moving out and letting the bank take it over and getting whatever they can out of it? I think you'll still be in the hole.

You might be better off declaring bankruptcy.

This conversation has been closed to further comments

7 Comments

View replies by

[deleted account]

I know the house might not sell for profit but in the end, if you can get any money at all out of it, it's better than living in a house that his moldy (hello health problems) and I think it will eventually help you. Try to find a private investor who would like to buy out the house. Yes for less than you owe BUT you would be able to get better living arrangements and save up a bit of money instead of wasting it on gas and such. Talk to a financial advisor first to get all the ideas out there and then you can make the choices according to what you think will be best.

Caitlin - posted on 09/17/2010

1,915

5

172

Tracey - we have teh IVA thing here too, except it's called a consumer proposal, and I just finished paying one off last year, all this debt is in my husbands name (because I still can't get credit), but either way, it's essentially both our debts..

Caitlin - posted on 09/17/2010

1,915

5

172

the problem with doing work on the bungalow is that it needs at least 20k more in renovations before I can sell it for anything close to a profit. Nobody wants a moldy drafty old house with faulty wiring and an unfinished basement (well, ti was finsihed, but we needed to unfinish it to get rid of the mold that was making myself and the girls sick..)



I will make an appointment to talk with someone about it. I've had an emergency fund several times but it always dissapears for something or another, gas so we can get to work, car repair, medications, whatever.. It's so frustrating..

Jessica - posted on 09/17/2010

260

6

13

Personally, I would stick it out. I found the best way to pay my bills was to put ALL my wages onto my credit card (Bill 1 paid) and use that credit card to pay as many bills as possible. I eventually found that I was paying out less on my credit card than I was putting on it.

If you can stick it out, do as much of the work yourself as possible, get it into decent shape, you can increase the bungalows value a LOT and sell up then with a nice little profit.

[deleted account]

I agree, you need the advice of a financial consultant. They can guide you in the right direction and help you make the best decision for your family. In a situation of this magnitude, you need professionals, not well-intentioned advice from other moms. Sorry I couldn't help more hun. =(



One thing I might suggest would be to do your very best to set up an emergency fund. Put away $1,000 that you DO NOT TOUCH unless you really need it, like for your daughter's medication. When you have that in place, it will make it easier to work your way out of debt, because your paycheck won't disappear when something comes up. Just don't forget to work towards replenishing the fund if you take money out of it. It costs way less to pay yourself back than to pay creditors back.



Also, I'm a Dave Ramsey fan. He has a radio show, books and course about personal finance. My husband and I took the course and it's helped tremendously. Just a suggestion.

Join Circle of Moms

Sign up for Circle of Moms and be a part of this community! Membership is just one click away.

Join Circle of Moms