The House I Bought

fairytale house by ~Siska92
fairytale house by ~Siska92

I bought a house for $150,000 eight years ago and had a loan of $120,000. The value of my house increased to $350,000. I took advantage of the situation and refinanced, being a conservative person, only borrowing $280,000 at a favorable 5.5% rate fixed for 30 years paying $1,600 per month for the mortgage and another $400 per month for real estate taxes and insurance. I was conservative and spent the $135,000 of home equity that I took out on improvement to my home (new kitchen, new bathrooms, hardwood floors, finished basement, and a small swimming pool for the little ones). This caused my tax bill to increase by $200 per month due to higher assessments. After a few years, the real estate market crashed and my house is unfortunately now only worth $180,000. I still owe $270,000 and have to pay $2,200 per month to live in “my” house. My choices are a) continue paying the high monthly payment with a giant negative balance sheet or b) rent a place for $1,200 per month, let the bank have the house and start from a clean slate.

I wish the situation was as nice as the above description. Here are a few additional realities:

  • All my neighbors got foreclosed and my whole neighborhood has been downgraded whereas before I thought I lived in a decent part of town.
  • My town is unable to meet budget demands and has to increase taxes to pay its bills.
  • I actually spent the money on Made in China products worth $0 today and a GM vehicle that’s lost a lot of its value instead of home improvements.
  • My bank let me borrow up to 100% of equity so I borrowed the full $350,000.
  • The loan I got had a variable interest rate and my payments are more than $2,200.
  • The $30,000 stock portfolio cushion that I had is now only worth $15,000.
  • I am about to lose my job even though I work hard. They say that the company has to cut back because of the economy.
  • I also had a credit card balance of $38,000 and student loans of $24,000.
  • Even though my wife really loves to shop, we just cannot afford to buy anything any more.
  • I had never signed any contracts before buying this house, let alone the sixty thousand mortgage documents they made me sign at the closings.
  • I’ve called the bank every month for the last six months asking for help or a way to get me out of this pickle.

What are my choices? I think I better let the bank have the keys, declare bankruptcy if I have to, move out into the $1,200 a month apartment and hope I can find another job so I can pay the rent before the economy gets any worse. How is any of this bull shit they talk about on TV going to help me this month? I voted for Obama to make a change but so far I see more of the same. There is little they can do to make me stay in this house given the reality I am facing.

5 Comments

  1. I am really sorry to hear this. Some of the office in which I work is home to a loss mitigation company. From what I understand the banks wont work with people on their mortgage unless they are more than two months behind and even then it can be like pulling teeth. I have heard stories about people who stop paying their mortgage and in some cases live in their house for up to two years, rent free basically. Maybe try to contact a loss mitigation company. I am not sure what state you live in but I know ther are some states in which loss mitigation companies are not allowed to operate.

  2. Sam – thank you very much for your comment. I started writing this in third person, then switched to second person, then settled on first person because I could not come up with a better way to convey what some people are going through in this country. As long as individual families do not feel it is advantageous for them to keep their houses, as long as their incomes are under attack of possible job losses, as long as their debt service is chocking them, as long as the foreclosure process is the easy way out, we have resolved little. The question is “where does the path of least resistance lead them?” I am very conservative but feel that even we as a family are very exposed because of forces completely outside our control. While the post above is not about our own situation (yet), how far are we really from finding ourselves in similar shoes?

  3. Sorry about that. I had to make it clear. Someone in the government must have read my post because half hour ago this rumor appeared “Late Thursday, Reuters reported the Obama administration is working on a program to subsidize mortgage payments for troubled homeowners who have gone through a standardized re-appraisal and affordability test, citing sources familiar with the plan.” The market responded with going from -3% to being up marginally. I’m sure smart people realize that “I” will be applying for unemployment and welfare benefits, unless “my” situation improves.

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