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Should I try to hold on to my home or let it go into forclosure?

We owe $455,000 on our house and it's now worth about $300,000. We have an ARM that is going to reset in Jan 09. We definitely can't afford the $1,000 jump in payment. Called the mortgage company (Ocwen) and they said we do not qualify for the government's freeze on interest rates program because our ARM was for 3 years instead of 2, but they said call back closer to the time the loan is set to reset and they'll work with me. Somehow I doubt it and I don't want to pay my $3,100 property tax bill on the house if I'm just going to lose it in the end. Plus, I'm thinking about all the money we could save every month if we let it go and just rented a house. We'd save about $1,000 a month on rent and $6,000 a year on property taxes. Why hold on to a house that costs too much and has no equity? Not to mention it's an interest only loan, so paying it off will NEVER happen. Please give me your advise. Is foreclosure really so bad? My credit score is already low (610)

Public Comments

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2. let it go
3. If it is intrest only, I would let it go. (I am no expert believe me) We foreclosed about 8 years ago due to loss of income. We were able to build a house last year. It won't hurt you that bad, you're at 610 now, how much worse can it get? You'll probably go up after dumping the house and getting some breathing room on you other bills. Good Luck.
4. Your situation is not as hopeless as it may seem, although it is a tough one. First, your credit score is still good enough to allow you to refinance. Normally you need a score of at least 600 to qualify and you have that. If your income, debts, etc. are within guidelines, you may be able to refinance the home to get a fixed rate that does not reset. You have 10 months left before the payment resets but it would be far better to do it right away than wait. There is a realistic chance of seeing higher rates over the months ahead. Second, if you can't refinance, all is not lost. You have 10 months within which to list and sell the house. If it is worth only what you say, then you will need to document that, which will happen as the sale progresses via an appraisal. Provide that information to the lender, along with a contract from a buyer, and it is possible the lender will allow a "short sale" where the home is sold and the lender agrees to accept less than the total amount owed. Some lenders may allow this because they have mortgage insurance to cover some or all of any deficiency they suffer. If the house is sold via a short sale, you may be freed of the debt entirely and can go on with your life. Third, Ocwen is a large lender and they will likely do exactly as they say and work with you to avoid foreclosure. It is in their best interest to do this. And there is a very good probability that more housing relief programs will be offered to help people like yourself in the coming months. The government is facing a huge foreclosure crisis and is working to find other ways to help. Thus, some additional programs may become available before your loan resets. Giving up now would be an unwise decision that could affect your credit and your life unnecessarily. You should continue paying your payments, taxes, and keeping the property maintained. The housing market may become stronger in the months ahead due to the many actions being taken to help overcome this crisis. If so, your homes value may start to recover. Over a longer period of time, your home's value may return to or exceed its mortgage amount. And if you do refinance to a regular loan that reduces the amount owed each month, a time will come when you do have equity in the home. Hang in there!
5. What is the probability that your home will be worth 455k again by the time you refinance in January 2009 . . . ? Probably very minute . . . think of your home as an investment . . . is the money your putting in worth the money your getting back . . . probably not . . . Now consider the 6,000.00 tax bill, the money you put into general upkeep (repairs, lawn service . . .), home owners insurance . . . all the misc. expenses that go into owning a home and then add in the amount you would save by renting . . . your probably ball parking around 12k. You could invest that 12k and actually EARN money . . . so again, think of it like an investment . . .