Mortgage and Real Estate guys

Timetopay · Jul 14, 2007

Gotta a buddy who was telling me this was his strategy because of the falling market.

He was going to get a neg am loan on his house that is starting to rapidly deprecate. Not sure exactly how they work but he said something that you can pay a much smaller amount that what the real rate is.

So anyway he said his house still apraises for more than he could really sell it for. So long story short he is going to get a neg am loan and have a small payment. In 5 years or so if the market has kept going down he is going to turn the house in and say take the keys but in the meantime he has a very low payment.

If it goes up than he sells or refis and moves on.

Not sure about all the ramifications but seems like although unethical a decent plan for someone who cant pay his bills and would have to almost hand over the house now anyway.

What should I tell him?

Iceman · Jul 14, 2007

Timetopay said:
Gotta a buddy who was telling me this was his strategy because of the falling market.

He was going to get a neg am loan on his house that is starting to rapidly deprecate. Not sure exactly how they work but he said something that you can pay a much smaller amount that what the real rate is.

So anyway he said his house still apraises for more than he could really sell it for. So long story short he is going to get a neg am loan and have a small payment. In 5 years or so if the market has kept going down he is going to turn the house in and say take the keys but in the meantime he has a very low payment.

If it goes up than he sells or refis and moves on.

Not sure about all the ramifications but seems like although unethical a decent plan for someone who cant pay his bills and would have to almost hand over the house now anyway.

What should I tell him?

Negam =10% down ask him where he is getting that money at?

Is he going to rent them? The extra money he saves each month on the Negam adds on to the principal of the loan. Not sure where he feels he is 1 upping anyone. He is in the same boat in 5 years either way as the spread between the principal and the amount he gets for it stays the same.

If he "give back the keys" than tell him ggod luck as his credit score will be shot and he will spend the rest of his life trying to repair that and if you don't have credit you dont have anything.

Not sure where he feels is the big jackpot at. The monthly cash flow? What does rents go far in your area?

Seymour · Jul 14, 2007

If he needs a mortgage to purchase a house this is not going to help him in the future - it's going to hurt his credit when he gets foreclosed on.

joeyfitzclick · Jul 14, 2007

His credit will be ruined, costing him thousands of dollars in the long run.

Timetopay · Jul 14, 2007

Guys I hear what you are saying i do. But if he eventually cant pay his bills his credit will be shot and dont want the guy asking me for dough,

So all im saying hypothetically is if his house appraises for the sake of easy numbers

If his house is appraised for 140 and he could only really sell it for 100 and his mortage is 120 right now. Wouldnt it make sense for him to do it if he is upside down already.

Just trying to figure out how all these guys who are upside down are going to get out or atleast survive.

sean1 · Jul 14, 2007

He has some options that make some sense.

He could call his bank and explain the situation. Banks don't like foreclosures. Some banks are allowing owners to change their loans to 40 years (Dropping the payment some).

If he really believes the home will continue going down, I'd sell it for $100k, and get a loan for $20k. Pay off that loan and rent something cheaper. No sense in owning in a rapidly declining market (Assuming it really is...)

Sean

Anonymous1 · Jul 14, 2007

He either risks credit hit (his way) or go to the lender and see what kind of work out can be made on the loan. Bank would rather have performing loan than non performing and facing foreclosure.

Seymour · Jul 14, 2007

Timetopay said:
Guys I hear what you are saying i do. But if he eventually cant pay his bills his credit will be shot and dont want the guy asking me for dough,

So all im saying hypothetically is if his house appraises for the sake of easy numbers

If his house is appraised for 140 and he could only really sell it for 100 and his mortage is 120 right now. Wouldnt it make sense for him to do it if he is upside down already.

Just trying to figure out how all these guys who are upside down are going to get out or atleast survive.

It's up to him if it's worth - how important is his credit to him - to me credit means nothing but to 95% of Americans it is very important - there is no way out that does not have ramifications - he's holding somthing that is worth less than what he owes - I would imagine in 3-4 years it will appreciate.