negative disposable income

[seanf12]

There are definitely some circumstances that apply to me that I haven't mentioned, but I believe would allow the numbers to work in my favor:

1) I don't believe I ever stated anything about unstable prospects in my original OP. I am lucky in the fact that prospects are good in this area and I would consider my current position secure

2) I am expecting a 3-5% raise (which could be as much as $375/month) in July, but we are trying to time out BK filing as to not mess up our chap 7.

3) My wife could have a part-time job tomorrow (we have relatives who have offered to watch our kids for free), making approx. $1100 take-home per month. But again we are holding off as to not mess up chap 7.

4) My parents have offered to pay off one of our car loans as a gift, saving us an additional $263/month. Again, holding off until after BK.

Given all of this, with a smart and reasonable budget, we could begin to throw a little extra at our mortgage and begin to chip away at the negative equity. Granted, it will still take a while, but we really have no intention of moving. Our current house fits all of our needs, great area for a family of 5, etc.

I completely understand what you are saying about letting go of negative net-worth, but can't the argument be made that it's only negative net-worth, on paper? If you have no need and no intention of moving, why not make the payments and take the tax write-off?

I think in the end every situation has lots of variables to consider and is different for everyone

[debtmonster]

I completely understand what you are saying about letting go of negative net-worth, but can't the argument be made that it's only negative net-worth, on paper? If you have no need and no intention of moving, why not make the payments and take the tax write-off?

Yep... that's what I've been wondering. It's only on paper. 10-20 years from now, what's happening now really won't matter.

[kiddles]

Paying $10K in interest to save $1K in tax isn't a good reason to own a home. There are good reasons, and plenty of them, but the tax break isn't a good reason to own a home. It's just a benefit if you DO own a home.

[cleo1357]

to Debtmonster

oops- wrong thread

[keepmine]

I completely understand what you are saying about letting go of negative net-worth, but can't the argument be made that it's only negative net-worth, on paper?

There is just no such thing as a paper loss. A loss is a loss regardless of if {or when you realize it} What you have to look at is the opportunity cost of throwing money at an underwater situation as opposed to being debt free and actually having money to save and invest. In a copule or 3 years, you should be able to get a mortgage with conventional rates and buy a home that may appreciate in value as opposed to sitting in a losing proposition for years and years.
Let's face it, all networth is essentially paper. From home equity to stocks and bonds to IRA's and 401K's. At some point, you do want to sell and it sure helps to have a positve net worth that can be turned into cash.

[sharksfan]

Yep... that's what I've been wondering. It's only on paper. 10-20 years from now, what's happening now really won't matter.

You are seriously underestimating how long 10-20 years really is.

[debtmonster]

Paying $10K in interest to save $1K in tax isn't a good reason to own a home. There are good reasons, and plenty of them, but the tax break isn't a good reason to own a home. It's just a benefit if you DO own a home.

So paying the same $10k to rent or someone else's mortgage is? I don't get it.

I'm still not seeing any benefits to renting unless I was single, didn't own anything and was renting a room for $300-400/mo.

That's why they always have the ads given to apartment complexes... "Why rent when you can own?"

I just don't like the idea of paying somebody else's mortgage. To me, that's just building somebody else's equity and not yours. It's really never a good idea to not build equity. So it's more than just living there for the tax break. You get the tax break year after year and you're normally building equity year after year. You can't look at things short-term in real estate. You need to look at it from a 10-20 year period.

How many people ever bought a house and kept it for 20 years and lost money? I would think very, very few.

[debtmonster]

I completely understand what you are saying about letting go of negative net-worth, but can't the argument be made that it's only negative net-worth, on paper?

There is just no such thing as a paper loss. A loss is a loss regardless of if {or when you realize it} What you have to look at is the opportunity cost of throwing money at an underwater situation as opposed to being debt free and actually having money to save and invest. In a copule or 3 years, you should be able to get a mortgage with conventional rates and buy a home that may appreciate in value as opposed to sitting in a losing proposition for years and years.
Let's face it, all networth is essentially paper. From home equity to stocks and bonds to IRA's and 401K's. At some point, you do want to sell and it sure helps to have a positve net worth that can be turned into cash.

And you don't do any of those things in a 3 to 5 year time frame. It's all done over 20-40+ years. Same with an IRA. If you started investing 2 years ago, you're probably negative. But you're not supposed to be touching it. You're supposed to leave it grow until you're 65-70 years old.

If everyone kept worrying about how they lost money in the short-term, there would be no investors or business owners. Any mature person knows that these things take a long time.

If you buy a house with the intention on moving out every year the way renters do, then you should just keep renting. The landlords love you.

[sharksfan]

And you don't do any of those things in a 3 to 5 year time frame. It's all done over 20-40+ years. Same with an IRA. If you started investing 2 years ago, you're probably negative. But you're not supposed to be touching it. You're supposed to leave it grow until you're 65-70 years old.

If everyone kept worrying about how they lost money in the short-term, there would be no investors or business owners. Any mature person knows that these things take a long time.

If you buy a house with the intention on moving out every year the way renters do, then you should just keep renting. The landlords love you.

This isn't exactly apples to apples. Why are you going to throw money away for the next 10 years at a negative equity situation when in 2-3 you put yourself in a position to start off and remain positive?

[debtmonster]

If you're gonna be in a negative equity position for 10 years then YEP, it's time to make that "Business Decision" and do the BK CH 7. I agree on that aspect. If you're going to stay there 10 years, you should have at least $50-100k in equity to put down on the next house 10 years down the road.

[SUB]

Location, location, location.

It'll make ALL the difference in how long it'll take for prices to recover. There are areas that it may indeed take 10 years.

[Gabe]

If you are going to be in a negative equity situation for even a few years you are better off renting and then buying back in and there is a good chance you will get even more home for the same money.

debtmonster your situation may work for you but it is not for everyone.

Rents in Central Florida (if it is a newer home) are often times far cheaper than the person's mortgage payment. My brother is paying $1500/month for a house that cost $500k originally.

Also with the way crime is out of control in Orlando you better ante up if you want to live in a safe neighborhood. There is no cheap and safe here without living 25 miles out.

[kkk1]

Errors

Debtmonster makes some good points but he is overlooking to major factors.

(1) The cost of owning a home is not just the mortgage. It's insurance, it's closing costs, it maintenance, it's property tax, it's all the extra furniture you will buy to fill up the home, it's extra utilities that come from heating a larger space, and the list goes on and on.

(2) Most people will not stay in a home 10 years, let alone 20. That era is gone. The average time people spend in a home is seven years. Given that the rule of thumb is that you should not buy a home unless you plan on staying at least three to five years, that's cutting it close. I am not opposed to home ownership, but I believe that the real estate lobby has done a great job of overstating it's benefits and underestimating its costs because they make commissions on the sale and nothing else.

[One Half Full]

You mentioned the wynn dixie but not your job. If the store is your only problem, you might be able to work around it for a while.

I am in a "rural" area, perhaps not as rural as you, but I do need to commute to a nearby city for work. I understand what the OP is up against. I too, have more of a house then I could get for the same price in the city. I do not like it here, its boring and I was never nature-girl, but it is cheaper, and frankly, anywhere you go is about the same. Evidently you can keep your doors unlocked or something. I haven't tried it yet.

Unlike the OP I am near to public transportation and within walking from food, and many other things: city hall, theater, a whole downtown area which is within walking/biking distance.

If I had no transportation and lived so far out that I could not even buy food, I think I would be tempted to move and get another job closer to a "city center."

I would ask if there was any way to become less dependent upon the grocery store. Could you do a major stock up like the old timers did? I know here that I buy a 20 pound sack of rice, and other things I don't usually need to go to the store every 3-4 months with a major stock up before hard winter hits. It takes a lot of charting what you actually use, but many people in very rural locations do it. It kind of sounds like living in the cowboy days, but frankly, it can be done for a few years while saving money for a car which you DONT need to finance-- in other words buy right out., cash in hand Also, sometimes you can get a car that is "nearly perfect" and put about 1000 in it for repairs.

Other things can be bought on line. And as you live in a rural area, have you thought of perhaps getting chickens? How about a garden?

In short, there are other ways to cut down on trips to the store.

The things I have come up with for my own situation are as follows:

Dry goods: stock up several months at a time.
Dairy: I contacted a dairy that does deliveries.
Fresh vegetables: grocery store, and farmer's market (walk, bike once a week), grow your own
Meat: eat less, but I could get a freezer and buy bulk

Post office, utilities etc. Stamps through mail, pay on line etc
clothing/shoes: Buy online, have delivered
other: wallmart/target on line and deliver
video: netflix

Things like trash hauling I can contract for maybe 50 dollars a load.

so many things I need, I can get on-line and delivered. Some things I can stock up on. Others, I can get locally-- possibly by cab during winter and walking, biking when the weather is fine.

So I have figured out ways to possibly do without a car. I will still need to take the bus to work, which you cant. You didn't state that you were having trouble going to work, only getting groceries.

Good luck.