Deed in lieu of foreclosure

[twuoo]

Does anybody have experience with this?

We are upside down in a big way on the mortgage because of the real estate market being so depressed in our area.

Want to just turn over the keys. Does this hurt your credit rating as bad as foreclosure?

Any advantages/disadvantages?

Thanks!

[HHM]

Do you think you will ultimately file BK in the future (be honest with yourself about that question)?

There are NO advantages regarding your credit report by doing a DIL vs foreclosure. I suppose one could argue that if you keep making your mortgage payments up to the point of completing the DIL, then you don't have any negative payment history, but frankly, negative payment history only last 24 months, the DIL or foreclosure lasts 7+ years. Here is the catch, the bank generally will not accept a DIL unless you are in default, so its a moot point.

Actually, the main disadvantage is that you don't get to live "rent" free in the house as a long as if you let it go to foreclosure. If you do a DIL, as soon as that process is complete, you have to move out. Foreclosures take anywhere from 4-8 months (and that is from the time they actually start the foreclosure, it usually takes banks 2-4 months before they will even begin foreclosure) If you allow the home to go to foreclosure, by not paying your mortgage, you could conceivably live in the house, without a monthly payment for 7 months to a year.

The main pain in the butt with DIL's, is the bank needs to agree to it. If your upside down, the bank is not going to want to take the home, and would rather see the home go in foreclosure (mainly for tax reasons)

Generally, thinking about letting your home go is a "symptom" of a much larger financial problem (real estate markets turn around eventually), so I suspect there are larger issues and that letting your home go will not ultimately solve your problem.

[DivorceRuinedMe]

Also - don't forget that you may get sued for the deficiency balance if you do do a DIL - unless you file or BK, then that would be discharged. But then why would you do a DIL then anyway?

[twuoo]

I thought that in a foreclosure, the mortgage company can sue you for the deficiency anyway if say they sell the home and it's not enough to cover the mortgage note?

[HHM]

Typically, in DIL, if the bank accepts, part of the deal is that there will be NO deficiency balance (also re-read my thread, I meant to say, there are NO advantages to doing a DIL vs. a foreclosure, I must have left out the "no" in my editing, opps).