Buying A Home
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Now we have 2 mortgages

So we just closed on our new house recently and our plans our to rent out our current home.  Like many others out there, we owe more than the house is worth so it's either rent it out or as a last resort let the old house go into foreclosure.

 If  our renters fall through or we are not able to collect the rent we need to get....then we are preparing for the fact that we might have to walk away from the old mortgage.  We don't want to do that, but we WILL NOT have 2 mortgage payments so it's either rent or give it up.

My question this worst case scenario where we do have to give up our old home....could the bank come after us for our new home? Or would our credit just take a bad hit?  My aunt told me they are starting to "come after people" but I don't see how that's possible since its the mortgage companys who are unwilling to work with people in this economy....

We owe 60,000 on a house that is now only worth about 10,000 and that's BS...we couldn't sell it if we wanted to not when houses down the road are selling for 10-13 thousand 

What are our other options?  Could we short sell it? Or Quit Claim Deed it over to someone to relieve us of the debt???? 

Re: Now we have 2 mortgages

  • I think it depends on your state whether or not they can come after you.

    You wouldn't have been approved for the second mortgage if the bank didn't feel like you couldn't afford both, and quite frankly you shouldn't have bought a second home if you couldn't make the payments.  You may not want to hear that but it is true.

    We were in the same position where we owed much more than DH's home was worth.  We chose to move and we knew we had to make the payments if we didn't have a renter.  We did rent after a few months and that worked well for a while.  When those renters moved out we decided to sell and took a $35K loss.  It was painful.  But again, you knew this when you decided to move. Saying you WILL NOT have 2 mortgage payments sounds like a cop out to me.

  • You will have to google whether your state is what is known as a recourse state. If it is, then yes, the bank can come after you for any remaining balance on the mortgage after they sell the house. And I've heard plenty of stories that they will do so, as it's become so popular for people in this situation to just walk away. I'm not sure whether recourse would also apply to a short sale. You'll probably have to check with your bank.

    " If our renters fall through or we are not able to collect the rent we need to get...."

    I sincerely hope that you figured out the fair market rent for your old home before this and did a little research on how to be a landlord. If not, now is really the time to start. Fortunately in many places rental markets are pretty strong right now.

    By the way, this: "We don't want to do that, but we WILL NOT have 2 mortgage payments "

    is rather entitled sounding, don't you think? You *do* have two mortgage payments. You signed up for both of them. If you *can't afford* two mortgage payments, that's one thing. But I'm assuming you can, because otherwise the bank would not have approved your new mortgage.

    My advice: When you start getting rent checks don't just take that money as profit. Put it aside as a separate e-fund for your old home. Then when you have to pay the mortgage for a month or two between tenants (because like it or not, it usually takes time to fill a rental), or have repairs to make, you won't be stuck paying it out of pocket. Being a landlord really isn't that bad. Just make sure to vet your tenants well. They'll make all the difference in what kind of experience you have.

    And no, I'm not just trying to rain on your parade. I'm on my third set of tenants in my first, underwater home.

    Lilypie First Birthday tickers
  • I agree with the others that you shouldn't have purchased a 2nd house if you couldn't afford both.  The mortgage on a $60k house can't be that much per month.  Surely you could cut some luxuries from your budget to be able to pay both, especially if your renters don't pay to cover your whole mortgage.  Each state has laws about whether they can come back for the balance you owe if you foreclose.
    Baby Birthday Ticker Ticker
  • Are you still in Michigan?  If so, you might want to read this

     I am not saying this article is law, and I would suggest talking to the bank or a lawyer before foreclosing, if you decide to do so, but it looks it depends on whether or not you signed a certain type of promissory note when you bought the home.

    If you signed this promissory you will be responsible for leaving the home in good condition and afterward you will be responsible for the amount between what the bank gets when they sell the house and the balance of your loan.  So, if they sell for $10k and you owe them $60k still, you will be responsible for the $50k.  If you don't pay they can sue you.  This could result in a lein being put against your new home.

    So, in short, find a way to pay the mortgage even if you don't have renters.  You asked the bank for $60k for a home, they gave it to you, now you don't want to pay.  That is your problem to figure out.  Buying a new home was probably not the best option if you can't afford both mortgages for even a few months.

  • Why are you so sure you won't find renters?  And why are you so willing to walk away?  Why not try to pay the mortgages?  You bought the houses, they're your responsibility.

    We currently own 3 houses, all of which we'd have to bring money to the table to sell.  Yes, money gets tight when one of them goes unoccupied, but <shrug> it happens.

  • I won't comment on the ethics but check out for lots of good info on there from others in your situation. 
  • First, I want to say that I understand your frustrations. We purchased our "starter" house in 2006 - an attached home in a less than desireable area. That's all we could afford to buy at the time, and we thought that buying was better than renting. We thought it was an investiment and that in 3 years we could sell at a gain and buy a bigger house in a better area. 

    Here we are 6 years & 3 kids later and we are now upside down on our mortgage. We tried (unsuccessfully) for 2 years to sell our house at a loss -- an over $30,000 loss -- and nobody would even come LOOK at it.

    When we purchased our home in 2006 we were preapproved for almost DOUBLE the amount that what we eventually purchased a home for. We knew we couldn't afford more so we didn't spend it. We did everything right -- never missed a payment or paid late -- then when we try to sell, the market is crap because the BANKS chose to give out loans that people couldn't afford. But guess what, the banks are getting bailed out and those of us who did what we knew was right are getting screwed.

    So, we made some choices. We decided to rent our home for a year and either rent or buy another house for ourselves. We will sell our 1st house, now an income property, at a loss and then we can claim that loss on our taxes.

    Our new house will not be anything close to what we could get if we weren't carrying 2 mortgages, even though -- AGAIN -- we were pre-approved for way more then we could afford to pay.... glad to see the lenders have learned their lesson!

    To be honest, if H & I were not required to have security clearences for our jobs, we would have probably walked away from our first house. 

    So, I understand where you are coming from.  

    I have no real advice since it seems like you can't afford to sell your house at a loss, like we plan on doing. Good luck, I hope it works out for you. 

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