Refinance or Foreclosure

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Hi Everyone,

I am seeking advice for a friend. Like lots of other people he bought a house to rent and earn few bucks before
real estate prices went down hill.
His loan is $108,000.00 but the property is appraised at $80,000.00. He is paying 7.0% interest on the loan.

He hasn't been able to refinance the property and is wondering if he should let the bank foreclose on him. Should he try to refinance, can he? Or he should let it foreclose? Any other possible options?


Thank you so much for you time and answers..!

P.S. , i don't know if this make a difference but he also he has a condo , worth $60,000

Member Summary

Has he tried for a HAMP modification ? They are doing principal reduction now

SUCKISSTAPLES said:   Has he tried for a HAMP modification ? They are doing principal reduction now

No he hasn't. I was just reading it, it is for rental properties as well. Did I read that correctly? I will talk to him about it , since his is a rental property and not a primary residence.

Thank you for the information.

Looks like the principal reductions are not available for rentals:
http://www.makinghomeaffordable.gov/programs/lower-payments/Page...

crhptic said:   Looks like the principal reductions are not available for rentals:
http://www.makinghomeaffordable.gov/programs/lower-payments/Page...



seems like there are couple of different programs. one is Home Affordable Modification Program HAMP, FHA Home Affordable Modification Program (FHA-HAMP) and Principal Reduction Alternative (PRA).

Does any one know which is a better option? He seems to be eligible for HAMP, but is PRA a better deal? He could move into rental property and make it his primary residence? What about FHA-HAMP?

Thank you very much!

What are his prospects for renting it out?
Can he rent it out for more than the mortgage payment?

Trashing credit and leaving ones self open to potential future debt collection doesn't seem worth it at a loss of 28k, IMO.

Depends on his own income level and if the property is producing a positive or negative cash flow. If he makes 30k a year, I might let go of it. If he makes 60k+, probably not.

CrAsian said:   What are his prospects for renting it out?
Can he rent it out for more than the mortgage payment?


The house is not in a good shape , needs constant repairs and its location is not that great either. He get renters on and off but he invests more time and money than he earns. At times the house has been vacant for 2 or 3 months. And at times a renter doesn't pay and he has to kick them out through court which is again loss of time and money.

vegas4x4 said:   Trashing credit and leaving ones self open to potential future debt collection doesn't seem worth it at a loss of 28k, IMO.

Depends on his own income level and if the property is producing a positive or negative cash flow. If he makes 30k a year, I might let go of it. If he makes 60k+, probably not.


Yeah that is my concern as well. He barely makes 30K a year.

The guy makes 30k/yr and owns two properties?


UZ22 said:   
Yeah that is my concern as well. He barely makes 30K a year.

UZ22 said:   crhptic said:   Looks like the principal reductions are not available for rentals:
http://www.makinghomeaffordable.gov/programs/lower-payments/Page...



seems like there are couple of different programs. one is Home Affordable Modification Program HAMP, FHA Home Affordable Modification Program (FHA-HAMP) and Principal Reduction Alternative (PRA).

Does any one know which is a better option? He seems to be eligible for HAMP, but is PRA a better deal? He could move into rental property and make it his primary residence? What about FHA-HAMP?

Thank you very much!


FHA-HAMP would only be for FHA loans. Does he have an FHA loan? If not, that's out.
PRA is only for principal residences. It sounds like this is not his principal residence.
HAMP may be his only option.

As far as moving back in: Did he originally buy this as a principal residence, and then later move? Or was it originally purchased as investment? My guess is if it's the latter, then moving in won't magically make it eligible for PRA, but I could be wrong.

UZ22 said:   vegas4x4 said:   Trashing credit and leaving ones self open to potential future debt collection doesn't seem worth it at a loss of 28k, IMO.

Depends on his own income level and if the property is producing a positive or negative cash flow. If he makes 30k a year, I might let go of it. If he makes 60k+, probably not.


Yeah that is my concern as well. He barely makes 30K a year.


Does he have any other significant assets?

Does the $60K condo have equity? Does he live in the $60K condo or is it also rented out? If they are both rented out, where does he live?

Just asking because depending on the totality of the situation he might or might not be in a position to consider filing BK. We don't have enough info to know, but just a thought.

Maybe he was selling real estate before the boom and used to make a lot more?

vegas4x4 said:   The guy makes 30k/yr and owns two properties?


UZ22 said:   
Yeah that is my concern as well. He barely makes 30K a year.



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