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OK so here is my deal.....I bought a house that we live in right now in 11/05 in CA. Now that the housing market has gone down we are about 75k upside down. I am disgusted because I can buy a really nice house that is a lot bigger for the same price I am paying now. My house is not my dream home it was our first house after I graduated from college. But now I am stuck with it and I can't even refinance it. So this is what I am thinking of doing....I want to purchase a new home right now and tell the banks that I am going to rent out my current house. Then if I can't find a renter I want to "walk away" from it or "foreclose". Oh I did an 80/20 loan. Questions: Can the bank come after my new house or assets? Can they attach my wages? Will I have a huge tax bill? What happens to the 1st and the 2nd? I know my credit will become bad but I have everything I need for now. I have not been late or missed any payments yet. But I am holding on to this months house payment in-case.
You sound like the typical American. Speculate, borrow money, and when things go south, pawn the losses off to someone else. I'd be surprised if a bank would loan you money to buy a second house if you can't even afford the one you have now. No, the bank cannot come after your assets. If you walk away, the bank gets the house, and that's it. (Isn't this a wonderful country.) California prohibits deficiency judgements on purchase money loans. (See Cal. Code of Civil Procedure section 580b.) You can contact a real estate attorney if you don't believe me and want to confirm for yourself. Expect a huge ding on your credit rating if you walk away from your obligations.
This Site Might Help You. RE: What happens if I foreclose or walk away from my home? mississippi so here is my deal.....I bought a house that we live in right now in 11/05 in CA. Now that the housing market has gone down we are about 75k upside down. I am disgusted because I can buy a really nice house that is a lot bigger for the same price I am paying now. My house is not my dream home...
I'm certain that you might find every financial answer at: financial-care.info- RE What happens if I foreclose or walk away from my home? mississippi so here is my deal.....I bought a house that we live in right now in 11/05 in CA. Now that the housing market has gone down we are about 75k upside down. I am disgusted because I ...show more
Sweetie, if it was that easy, don't you think everyone would be doing that? In answer to your question, yes, they can come after your new house and other things you owe. You are not alone. Many many people around the U.S. are in your very same position and considering renting out their home as well. Here's what you need to do, in this order, for this to workout for you: 1. Talk to a lender to see if it will even be possible for you to buy another home when your current home is rented out. (give him the skinny- in addition to your W-2 and paystubs, tell him what your monthly mortgage is and how much you think your home could rent for. Probably will be less than your mortgage) 2. Once you find that it is possible, advertize your home for rent. At the same time as you're doing that, call a Realtor to help you look around for other houses in your price range that you would be satisfied with. Do this so that when you find an eligable person to rent your house, you'll already be that close to buying your next house. 3. This step is very important for you. Any person who is interested in renting your home MUST be willing to SIGN a rental contract for, at the very least, one year. You should really shoot for a two or three year or even longer contract but if not, don't settle for anything less than one year. 4. Once you have someone who is willing and able, have them sign the contract 45-60 days before their lease even begins. Remember, you'll need a little more time to settle on the next house you want to buy, plus the escrow for your next home will likely be 30 days or so. Be sure to date the contract for the day the lease will begin, the day it will end and the day of signing. Be aware that renters may not treat your home as nicely as you did. The home probably won't be in as good of condition at the end of the lease as it was when the lease began. You may also want to keep a home warranty on the house that covers everything. Also, keep in mind that if the home, in any way, becomes unlivable,(air conditioning or heater breaks, plumbing stops working, roof not sealed, etc.) you must pay for that. If financials allow, it would probably be a good idea to hire a property manager to save you some headache on the whole thing. Remember, foreclosure should be your VERY VERY last option.
If you're financing through the same bank they can most definitely come after your new house and any assets you have. You'll have to pay taxes on both properties and if your taxes aren't paid they can put the house up for sheriff sale. I wouldn't just walk away from a home you're currently paying for - your credit will become bad and many lending institutions might not even lend you money for another home when you're currently paying for one.
Okay, now let's not forget how the IRS views discharged debt (such as in a foreclosure) for individual income tax purposes: Let's say you owed 1 million dollars on your home (hey, it's CA, right?), and, through the forclosure process, the bank could only sell your home for $600,000 (a short sale) in 2008. They would take a loss of $400,000 out of that (plus the cost of their foreclosure actions). Now, that $400,000 of your debt is considered "discharged" in 2008 through that foreclosure. Well, guess what? The IRS considers that $400,000 as income to you for tax year 2008. At an average marginal tax rate of 15% (what you really end up paying the IRS after your tax return, not your withholding rate, which is an average of 25%), that's $400,000 X .15 = $60,000 in additional income taxes that you'll owe for 2008. With a foreclosure, now you'll have two problems instead of one: you'll have a black mark on your credit report, and, you'll be paying the IRS off your $60,000 tax debt to them. That will be over $1000 per month for 60 months at prevailing interest rates. If you think an extra $1000 a month in expenses for 5 years sounds good, along with that new house payment, go for it. I wouldn't. That is a high example that I gave. Plug in your own numbers to see what the income tax hit is you'll be taking. P.S. Brian G's comment about the Mortgage Forgiveness Debt Relief Act of 2007 (item 3 in his post) probably won't apply in this situation. It's geared toward people who want to re-finance their mortgages, not those who want to walk away from them or go into foreclosure. Here's an excerpt from the White House's fact sheet on it: "Today, President Bush signed the Mortgage Forgiveness Debt Relief Act of 2007, which will help Americans avoid foreclosure by protecting families from higher taxes when they refinance their home mortgages. This Act will create a three-year window for homeowners to refinance their mortgage and pay no taxes on any debt forgiveness that they receive. Under current law, if the value of your house declines, and your bank or lender forgives a portion of your mortgage, the tax code treats the amount forgiven as income that can be taxed. This Act will increase the incentive for borrowers and lenders to work together to refinance loans and allow American families to secure lower mortgage payments without facing higher taxes."
Lot of questions here...I'll give it a go. First of all, if you can finance another home and your home...you're doing pretty well for yourself financially. If that is so, you're going to find yourself in a financial situation you may not want to be in if you "walk away" from your current home. 1. Yes, the bank can but does not always come after your new home. 1a. Yes, the bank can come after your assests through the summary judgment they will obtain. 2. Yes, the bank can come after and attach your wages. They will definately do this if they show you can afford the home, but are in dishonor. 3. Tax bill? Not necessarily. Check out the Mortgage Forgiveness Debt Relief Act of 2007. It may apply to you in this case. I understand that the home you have isn't your "dream home". 99% of MOST Americans do not live in their "dream home". I'm one of those 99%ers...but it is a home and it keeps me safe, dry and it gives me a place to store all my crap. Your biggest problem may be that IF you can afford both houses, and you "walk away" from the one you have now. The bank IS going to come after you. IF you can not afford your home and a mortgage on a new home of equal value...I don't see you being able to finance the new home anyway. There you have it.
It's not a good idea, for so many reasons. Yes, the lender will foreclose. If they do not get all of their money back, they can file a lien against you in order to recoup any any additional amount. This lien will encumber your new home.
Age of teens? they can get PT jobs. I did newspaper delivery and lawn cutting. What is your occupation? education? - can you sell part of your home--as an investment for others? see if you can find a relative who can buy your home and they can get included with that, a home repair warranty insurance deal, fix the house like new and sell it back to you! THINK creatively! I will help further if asked.
I could not afford my house in new jersey. I walked away prior to being late and bought a house in florida where asset protection is fantastic. My home will be going into floreclosure shortly but I had to do what I had to do for my family