So I went back home for father's day a few weekends ago and stayed at my dad's house where I grew up. We went out to brunch for Father's Day and he was asking me and my two brothers.. ages 30, 38, 22 respectively (our dad is 60), what he should do with the house. Up until this point, I knew the house was under water but I didn't know the specifics.
My dad told me his monthly mortgage payment is about $4,000 - he has a 1st mortgage of about $345K (adj rate is currently 7.5% and adjusts every 6 months) & a second mortgage of about $65K with a 10% interest rate (so loans total $410K). He had the house appraised recently and it came back at $375K so it's underwater by about $35K.
How he got here --> Divorced in 2005 and had to refinance the house to remove my mom and do a cash-out refi to give her half the value. This was the height of sub-prime lending and the loan is through a private lender so no FHA government protections and it's not owned by Fannie or Freddie. He may have done a few cash-out refis to pay off debt from raising 4 children (remember that housing prices were soaring and cash-out refis were super easy to get). The loan has been sold a couple of times but the sales haven't been recorded, other than an incorrect recording where they marked the second mortgage as the first mortgage.
The options we were going over:
- Stop paying and stay until he defaults on the loan and is kicked out (remember, he will be saving $4K a month with this option - he lives in the suburbs of MD so rent is nowhere near that costly)
- Try and short sell the house. My dad doesn't think the lender has an incentive to short sell because they are making a fortune off him (he hasn't missed any payments). We toyed with the idea of my brothers and I putting the short sale offer in on the house to keep the property in the family because it's in a really nice neighborhood.
- Keep paying, fix up the house so it is ready to be rented out. It could be rented for about $2,500 so he'd still have to fork over $1,500/month and wouldn't be able to live there.
Thank you in advance for your help!
Submitted June 30, 2019 at 08:22PM by vwalsh10 https://ift.tt/2KPVvYU
