Need some ideas on our mortgage payments

[Wild Lupine]

We bought our house right before the economy tanked and the housing bubble burst. We got a first time home-buyers assistance through a state and FHA program. When we got the mortgage, my husband's business was doing well, there were no kids (no daycare costs), and we could afford it.

Now, our finances are different, very different, and our mortgage payments are getting increasingly hard to make. The agency we got our mortgage through doesn't refinance and doesn't provide the mortgage assistance programs that have been set up for people like us in the past few years. It does revise the terms of the mortgage for people who are struggling but apparently we're not struggling enough because they said they can't do that for us.

Also unfortunately, we experienced a flood shortly after we moved and the house's value went way down. Now our house is appraised at less than what we owe on it, so we can't get a mortgage through another bank because there's no equity in the home and there's no down payment in the bank. We cannot sell, because given what houses have sold for in our neighborhood recently, we wouldn't make what we owe. Renting it would only cover about 2/3 of the payment, and we couldn't afford 1/3 of our mortgage payment, plus another place to live on top of it.

We have been making all our mortgage payments on time, but at great cost. My husband and I don't have heath insurance, other bills are piling up, we eat nothing but rice and lentils (practically), all my socks have holes in them, you get the picture.

If you've made it this far, thanks! I'm looking for ideas about what we can do to lower this payment; maybe there are programs out there I haven't heard of.

[MCsMom]

Other then calling up your mortgage lender I'm not sure what options you have then to tank your credit and start over in a rental.

[Wild Lupine]

Originally Posted by MCsMom 

Other then calling up your mortgage lender I'm not sure what options you have then to tank your credit and start over in a rental.

Those are the two options I see, too. Maybe play the lottery, someone has to win those things.

I was hoping someone might know of something else, but there are so many people in situations like mine, or worse, that there's not enough help available for everyone who needs it.

[crunchy_mommy]

I was looking into things a few months ago but never found anything. We are in an almost identical situation to yours. We are just plugging along & hoping it eventually gets easier.

[Wild Lupine]

Originally Posted by crunchy_mommy 

I was looking into things a few months ago but never found anything. We are in an almost identical situation to yours. We are just plugging along & hoping it eventually gets easier.

Thanks. I hope it does get easier for you very soon!

[freestylemama]

Could you downsize and try and rent it out?

We moved for DH's work and tried to sell our house.  We couldn't sell it for less than half of what we owed on it but we were able to find people to rent it from.  In our case, this was the best option because we have perfect credit and will want to buy again and couldn't stomach throwing away an entire adulthood of paid off debts and no late payments because of the stupid housing crash. 

I know that for some people it makes sense to just walk away.  It didn't for us, but renting it out did.

[Wild Lupine]

Originally Posted by freestylemama 

Could you downsize and try and rent it out?

We moved for DH's work and tried to sell our house.  We couldn't sell it for less than half of what we owed on it but we were able to find people to rent it from.  In our case, this was the best option because we have perfect credit and will want to buy again and couldn't stomach throwing away an entire adulthood of paid off debts and no late payments because of the stupid housing crash. 

I know that for some people it makes sense to just walk away.  It didn't for us, but renting it out did.

I'm glad renting worked for you. Were you able to get the rent to cover your entire mortgage payment? I've looked at what rents are going for and there's a several hundred difference between what we can charge for rent and our monthly payment.

But maybe we could downsize enough to still make that work. I can fathom giving up a lifetime of credit because of the crash, and I sunk my life savings into the down payment (a measly life savings, but even a small number is big when it's everything you've got).

[heatherdeg]

You have to look at the "renting out" situation from a net perspective.  I just went through this with a friend trying to sell her condo to relocate.  I'll use her numbers to illustrate.  She thought she would be "losing money" renting the condo.

The condo's total carrying cost (if she's not living in it) is $1500/mo.

She can rent it for roughly $1200/mo.

This leaves her out $300/mo.

She CAN downsize when she moves and pay rent of $900/mo.

Her rent of $900 plus the $300 to the condo is $1200/mo total outgo for her.

And that's still $300/mo less than paying for the condo and living in it when you're looking at the bigger picture.

So the question becomes: can you find a place to rent where the rent plus 1/3 of your mortgage payment is less than your total mortgage payment?

[freestylemama]

Originally Posted by Wild Lupine 

I'm glad renting worked for you. Were you able to get the rent to cover your entire mortgage payment? I've looked at what rents are going for and there's a several hundred difference between what we can charge for rent and our monthly payment.

But maybe we could downsize enough to still make that work. I can fathom giving up a lifetime of credit because of the crash, and I sunk my life savings into the down payment (a measly life savings, but even a small number is big when it's everything you've got).

Yes, for right now.  Once we pay for the rental inspections and the extra taxes and lose the homestead exemption, we'll probably lose a few hundred a year.  This is still so much better for us than just letting our credit tank.  I don't think this is the best solution for everyone, but for us it was.  We're actually much better off financially than when we bought the house and the thought of it keeping us from getting another mortgage if we want one was really horrible.  

[Olma]

Originally Posted by heatherdeg 

You have to look at the "renting out" situation from a net perspective.  I just went through this with a friend trying to sell her condo to relocate.  I'll use her numbers to illustrate.  She thought she would be "losing money" renting the condo.

The condo's total carrying cost (if she's not living in it) is $1500/mo.

She can rent it for roughly $1200/mo.

This leaves her out $300/mo.

She CAN downsize when she moves and pay rent of $900/mo.

Her rent of $900 plus the $300 to the condo is $1200/mo total outgo for her.

And that's still $300/mo less than paying for the condo and living in it when you're looking at the bigger picture.

So the question becomes: can you find a place to rent where the rent plus 1/3 of your mortgage payment is less than your total mortgage payment?

This makes a lot of sense  I hope it works out for OP.

[crunchy_mommy]

Originally Posted by heatherdeg 

You have to look at the "renting out" situation from a net perspective.  I just went through this with a friend trying to sell her condo to relocate.  I'll use her numbers to illustrate.  She thought she would be "losing money" renting the condo.

The condo's total carrying cost (if she's not living in it) is $1500/mo.

She can rent it for roughly $1200/mo.

This leaves her out $300/mo.

She CAN downsize when she moves and pay rent of $900/mo.

Her rent of $900 plus the $300 to the condo is $1200/mo total outgo for her.

And that's still $300/mo less than paying for the condo and living in it when you're looking at the bigger picture.

So the question becomes: can you find a place to rent where the rent plus 1/3 of your mortgage payment is less than your total mortgage payment?

This makes sense with those numbers but I feel like there are other things not factored in here... like perhaps increased commuting costs, and higher maintenance costs for the house when you rent it out (because renters might be hard on the home or simply because you need to fix things you'd otherwise just live with if you were living there)...plus taxes? Renter's insurance? Other things I'm not thinking of that can add up... I feel like it would need to be more than a couple hundred dollars' difference to make something like that really worth it, but maybe I'm just not thinking it through all the way. I guess it depends what kind of house OP lives in and all.

[tropicana]

can you rent out a part of the house and still live there? ie, take in a tenant? be reative about it. perrhaps there is a nice older lady who could also help take care of the children and somehow reduce the daycare costs in exchange for a smaller rent (but still pay you some to live there)? i've been researching family history and back in the 1920s and 1930s it was pretty common for unrelated people to share housing. is there a section of your house that could be rented out? not ideal, but you are looking for temporary solutions to "get by." 

[Wild Lupine]

Originally Posted by heatherdeg 

So the question becomes: can you find a place to rent where the rent plus 1/3 of your mortgage payment is less than your total mortgage payment?

This is an excellent idea. I don't know the answer off the top of my head, but I can look into into rental costs and see if might be workable for us.

Originally Posted by crunchy_mommy 

This makes sense with those numbers but I feel like there are other things not factored in here... like perhaps increased commuting costs, and higher maintenance costs for the house when you rent it out (because renters might be hard on the home or simply because you need to fix things you'd otherwise just live with if you were living there)...plus taxes? Renter's insurance? Other things I'm not thinking of that can add up... I feel like it would need to be more than a couple hundred dollars' difference to make something like that really worth it, but maybe I'm just not thinking it through all the way. I guess it depends what kind of house OP lives in and all.

There are other things to factor in, and they're not all practical. I have some other threads in other forums that feed into the decision-making about this. Renters probably would be hard on the house, but unless they totally trash it, it's probably worth it to keep the house in the long term (within reason). Taxes and renter's insurance are good things to look into, though I thought renters got their own renter's insurance, not the owner. We do have household insurance already.

Quote:

Originally Posted by tropicana 

can you rent out a part of the house and still live there? ie, take in a tenant? be reative about it. perrhaps there is a nice older lady who could also help take care of the children and somehow reduce the daycare costs in exchange for a smaller rent (but still pay you some to live there)? i've been researching family history and back in the 1920s and 1930s it was pretty common for unrelated people to share housing. is there a section of your house that could be rented out? not ideal, but you are looking for temporary solutions to "get by." 

We don't have a bedroom for someone else, unfortunately. But this is a great idea.
 

[crunchy_mommy]

Originally Posted by Wild Lupine 

Taxes and renter's insurance are good things to look into, though I thought renters got their own renter's insurance, not the owner. We do have household insurance already.

I was thinking more that you'd probably need to maintain some form of homeowner's insurance for your house, plus obtain renter's insurance for an apartment you are renting. And YOUR renters would need to get separate insurance themselves.

[sunflower.mama]

To address the issue of renter's vs. owner's insurance - yes as a LL/owner you'd need to maintain homeowner's insurance for the value of the property.  The renter would (could) insure the contents of the home.  As a tenant we did this.  It was minimal - as in $30/year.  We did it to have a rider for my engagement ring.  You would also pay this if you wanted to insure the contents of the home you'd rent.  The cost would be negligible compared to homeowner's  insurance which contemplates rebuilding the home in case of a fire etc and is a requirement of your mortgage.

[Wild Lupine]

Originally Posted by crunchy_mommy 

Originally Posted by Wild Lupine 

Taxes and renter's insurance are good things to look into, though I thought renters got their own renter's insurance, not the owner. We do have household insurance already.

I was thinking more that you'd probably need to maintain some form of homeowner's insurance for your house, plus obtain renter's insurance for an apartment you are renting. And YOUR renters would need to get separate insurance themselves.

OK, I see what you mean. Take renter's insurance into account when calculating the costs of us finding another place to live while other people live in our house.

[heatherdeg]

Originally Posted by crunchy_mommy 


This makes sense with those numbers but I feel like there are other things not factored in here... like perhaps increased commuting costs, and higher maintenance costs for the house when you rent it out (because renters might be hard on the home or simply because you need to fix things you'd otherwise just live with if you were living there)...plus taxes? Renter's insurance? Other things I'm not thinking of that can add up... I feel like it would need to be more than a couple hundred dollars' difference to make something like that really worth it, but maybe I'm just not thinking it through all the way. I guess it depends what kind of house OP lives in and all.

In my scenario, these were figured in (well, commuting was identical for this friend--but yes, should be considered).  She had a quote for renters insurance where she was going and she lucked out that her homeowners insurance went down as a landlord rather than up (for us, it often goes up).

You have to have homeowner's insurance as a landlord for 1) the structure  and 2) liability.  Anything that the renter owns is covered by "renters insurance" or "contents insurance".  Add to it that if you are going to leave anything at the old house, you'll need a rider to cover that as well.

And actually, we took my friend's sitch a step further and considered a property manager.  So if she's receiving $1200/mo in rent, then the average she'd pay in property mgmt fees is $120/mo.  So remove that from the $300/mo net she got and she's still getting $180/mo more in her pocket.  She was moving from NJ to FL and this was a huge concern to her.  She still has to pay for whatever repairs are there, but she doesn't have to be there to do them/get them done.  Property managers aren't always necessary: when we owned in Baltimore and lived in NJ, we had an electric company that was set up for out-of-state landlords where you'd call in the issue, they'd coordinate a time with your tenant, call you after investigating but before working to clear the price (usually what they originally quoted) and then bill you.  If I'd had a plumber like that, I'd have been in great shape!  (in all fairness, I didn't look that hard).