Renting vs Mortgage During BK13

[rjl0206]

Just wanna ask the general pro's and cons. I know everyone will have differing opinions in respect to how much you pay for mortgage and also if your underwater. But sometimes if you on the borderline in terms of pricing would it be better to just stay put? thanks all.

Ray

[NoTomatoCan]

I would tend to think that if you are close to what you owe, and are happy with your situation, don't plan on moving any time soon (or have family/job issues that could force you to move anytime soon), and account for the actual maintenance costs of homeownership, than staying put seems to be a good bet.

I mean, by definition anyone who is doing a lien strip (myself included) HAS to be underwater on their home, and there are plenty of us who are doing lien strips.

[TexasEx]

Here is another opinion: knowing that ch. 13 was a definite possibility for us, we bought a new home a few months before filing (and before our credit imploded).

We could have rented while in 13, but we knew this is the place we wanted to live in for the next few years. Also the allowed amount for rent in our county is $850 for a family of four (are you kidding me?). Our mortgage payment is $2500 yet the trustee can not question how much your mortgage payment is (unless you really can not afford your payment, for us it is about 25% of our income). You can see how you can easily protect that income that otherwise would have gone to unsecured creditors had we been renting.

[ColoradoBell]

Texas has a good point and he was lucky that he had time to plan. (Yes, I sure agree that $850 is terribly chintzy for rental allowance.)

RE staying in your home: I agree that there are many people who bought during the high end of the market and that now, their homes are underwater and may be that way for some years. If you are in that boat, then I think you need to figure out how much you have already invested in your property already. You'll lose that if you give up your house and rent. Then compare how much you'd be paying on your mortgage for 5 years, property taxes and insurance and compare that with how much you'd be paying in rent. The thing is, in five years MOST homes will have equity in them, which means that you'd end up with something at the end of five years as opposed to renting for five years and ending up with nothing. Additionally, you get to write off interest and some home improvement costs while you can't write off rent.

I filed for bk for different reasons than most: trying to save a house I spent 5 years of my life building from my X, who was trying to give it away.
There were judgment liens on the house from my X against me...so I had to pay them from my share. But as the sale price (and my share) got lower, there wasn't enough money to pay the liens. And once the house was gone, I had no assets.
So my filing was to save the house by buying out X's share, stripping the judgment liens (from secured to unsecured which is what they really were anyway as he had no 'judgments' against me) . After that, if I work on home improvements, I can sell the house for enough to pay debts and buy something smaller with cash.

So in my case, saving the house and paying the mortgage is the only way I can come out of Bk with anything. I'm definitely in the 'pro-mortgage' camp, but I can understand why some people prefer renting.

[rjl0206]

Points well taken gentlemen. My house is upside down about 20-25%. My main concern is that it is a starter house with a good amount of work and upgrade needed. With two kids (10 and 4) even after BK13 my priorities are split between staying in the house, TRYING to borrow money/save money to upgrade for a growing family and/or saving/send kids to school etc etc. I mean, how long after BK13 can I realistically expect to borrow 20-30K just to upgrade the bathroom, rooms, kitchen, basement? everything except the washer/dryer and Central air is from 1970. still works but I give it maybe 5-10 more years. My mortgage monthly is about $3600 with taxes/insurance @ 7.25% 30 year. Bought it in 2006 for $360,000 (still owe about $328,000) this is Northern NJ. Anywho, now Im just venting. been trying for a modification with no luck. thanks for listening all. maybe a move to another state will help if the fiscal numbers work out.


Ray

[espo1357]

Texas has a good point and he was lucky that he had time to plan. (Yes, I sure agree that $850 is terribly chintzy for rental allowance.)

RE staying in your home: I agree that there are many people who bought during the high end of the market and that now, their homes are underwater and may be that way for some years. If you are in that boat, then I think you need to figure out how much you have already invested in your property already. You'll lose that if you give up your house and rent. Then compare how much you'd be paying on your mortgage for 5 years, property taxes and insurance and compare that with how much you'd be paying in rent. The thing is, in five years MOST homes will have equity in them, which means that you'd end up with something at the end of five years as opposed to renting for five years and ending up with nothing. Additionally, you get to write off interest and some home improvement costs while you can't write off rent.

I filed for bk for different reasons than most: trying to save a house I spent 5 years of my life building from my X, who was trying to give it away.
There were judgment liens on the house from my X against me...so I had to pay them from my share. But as the sale price (and my share) got lower, there wasn't enough money to pay the liens. And once the house was gone, I had no assets.
So my filing was to save the house by buying out X's share, stripping the judgment liens (from secured to unsecured which is what they really were anyway as he had no 'judgments' against me) . After that, if I work on home improvements, I can sell the house for enough to pay debts and buy something smaller with cash.

So in my case, saving the house and paying the mortgage is the only way I can come out of Bk with anything. I'm definitely in the 'pro-mortgage' camp, but I can understand why some people prefer renting.

Good post.
But, five years is a bit optimistic, no?

but, then again, I don't know anything about real estate and my home is over 100k upside down.