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Doctor FU · Aug 3, 2009, 03:06 AM

My wife and her ex-husband own a home that from their marriage. They have been renting it out, but the renter has reached the point where he is no longer interested in buying or renting the home. They are severely up-side-down on the mortgage.

Their first loan is around $175,000 and their 2nd mortgage is a line of credit of $40,000. The home appraises at $175 to $180 total.

Neither my wife or her ex-husband want the house. Does foreclosure make sense in this situation? I know it will hurt the credit of both her and her ex-husband, but I don't want to throw away $45,000 of cash (that I don't really have) to save a house I don't want.

Suggestions? We have looked at a short sale, but would that work with 2 mortgages.

ScottGem · Aug 3, 2009, 05:20 AM

Is the HELOOC maxed out? If the line is $40K, but not used then its immaterial.

Are both mortgages from the same lender? That would help make a short sale work.

In a foreclosure, the owners may still be held liable for the balance of the mortgage(s) after the auctioning of the property. So letting it go in foreclosure does not make sense if you can work out something else.

Fr_Chuck · Aug 3, 2009, 05:46 AM

yes, esp with a line of credit, if the home sells for less they will be very likely held responsible for paying it back after the house is sold.

So that one renter does not want it, are they still renting it, or find another renter for a few years till house values go back up

Doctor FU · Aug 4, 2009, 03:36 AM

The mortgages are not from the same company, which complicates things a little. In the area we live, the we would need to rent the house for about 7 years (at a minimum) to get to the value of the loan.

Fr_Chuck · Aug 4, 2009, 03:52 AM

If you can get a payout of a loan within 7 years that is a fairly good investment. Plus after you get about 1/2 of it paid off, a rental property showing a positive cash flow could b a good item to sell.