Where are we going to live? Please help!!

[FL349]

We are about to file a Ch 7. That is really our only option. I don't need help with bankruptcy decisions as those have already been made. What we need help with is deciding where to live. I just want to make the best decision for our family.

Here's our issues in a nutshell:


We bought our first home in 04. It's in a lower-middle class rural area. In 06 we refinanced it in order to buy our home we live in now. The housing market plunged and we were unable to sell our first home, so we had renters in it up until this month. We owe $144,000, fixed rate 8%, worth about $120,000. Total payment $1100/mo.

The home we are living in now I adore. Great neighborhood, my kids go to one of the best schools in our state. The problem is, our mortgage is interest only, set to go up 2009. We paid way more than the house is now worth. Right now we owe 243,000, adj rate IO, worth about 215,000. Total payment 1540/mo, but we pay $2900 for property taxes that are not escrowed that we pay with our tax refund. It is set to adjust next year, which will raise our payments significantly; probably $300/mo. I know that this house is more than we can afford, and we are living in an area that is above our means .


As of right now both home mortgages are current. That will be changing soon though as our renters have moved out and we cannot afford both mortgages. We have to decide what to do right now. Our take-home pay is 4300/mo.

Our options are:

Let the house we live in now go into the bankruptcy, and move back into our first home. We can afford the payments but I HATE uprooting my children yet again, and I do not like the area. Positives are we can finally afford to save a lot of money for the future. We would also be able to rent this house out if neccessary in the future without causing any financial burden, and someday it may actually be an asset. And, while this is moving my children again, it is back to a house that they know. This option will give us the most $ (cheaper payment, plus it is a small house so electric bill is over $100 cheaper). There is also a charter school that if my children can get into will give them a good education.

Let the starter home go w/the bankruptcy and stay in our home now. While I know that this is probably a stupid decision since we are filing BK anyway and this house is bad debt, I feel so guilty for moving my children away from a place they know and love. I love love my house. We have put so much $ into it (a big reason why we are in a financial mess right now). If we stay after basic expenses we would have approx $300/week to pay for groceries, medical, anything extra etc which is doable but not ideal. Our problem is that dh is probably going to be transferred out of state within the next 3-5 yrs. We owe so much on this house I don't know how we would sell it then, and I don't want to be facing a foreclosure after filing for bankruptcy.

Let both houses go and rent a house in the neighborhood we live in now. We would lose both homes, have to move the children yet again to a different place, but we can stay in the great neighborhood. A small rental is around $1300/mo. This is the option my dh really wants. I don't know. I hate being at the mercy of someone else, and I worry that we would have to move yet again if the homeowner decides to sell.

Thank you if you have made it thus far. Any advice would be greatly appreciated!

[justplaintired]

Wow you do have some tough choices here. My opinion is I agree with your DH. If you know you will be transferred in a few years there really is no point in keeping the houses, however if you did a ride threw on house #1, would it be better then renting? Could you possibly build equity for when the time comes to move? If we could see into the future and the housing market turns around you would possibly have some profit if you sold it down the road, which could possibly get you in a new place when you do move.

If you do a ride threw on one of the houses, do not reaffirm, you could walk away down the road. But the big question is which can you honestly afford? It sounds like house #1 is the one you can and you don't really want it. But in the long run it would save you money. House #2 doesn't sound like such a great idea, sorry, but it seems in this house you will still be struggling after the BK.

Now here's another question, when you filled out your paper work which house did you use for your budget? because keep in mind that will matter when you file. You should definitely look into what you want to do before you file. If you included house #2 and then file on it, you will have to change your figures.

So all in all I vote for either renting or house #1. I know it's hard to think about this move, uprooting the kids, leaving a home you love, but all in all, it's all about what can you afford? What will make life easier. Because if filing doesn't help, then what happens? What if you keep the house, then find out you simply can't make the payments? I know hard choices.

[Minnymouth]

Really, there is "no choice"...........

House #1 you owe more than its value is now..... Is the housing market going to change enough in the next 2-3 years to make a profit? I doubt it.....

House #2 - more expensive than you can really afford right now with everything that is going on in your lives and you didn't say if you owe more than the value of it now.

Sooooooo......

Option #3....... with the big possibility of DH relocating in the next 2-3 years your best option may be to surrender both houses and get out from underneath the debts of both of them at the same time.

Get out from under ALL the excess debt and get a "fresh start".....

Rent a house in the area that you like so well until decisions are made about the future. Save what you can towards another home later down the line.
Kids are not going to be home forever.....

Come time to move, you will be debt free, not worrying about trying to sell a house, or it foreclosing on you, etc down the line.

Sometimes you just "have to do what you have to do" to survive and get things straightened out.

Me personally, I would let both homes goes at those high interest rates and big payments. I would save my money and plan on another home in the future after decisions are made about jobs, moving etc. By then the housing market will hopefully be more settled, homes will be cheaper (they have to be to sell them and their gonna have a "bunch" to sell).

Often cutting your losses, eliminating the excess baggage (expenses) is the best way in a bankruptcy.

It's hard, I know from experience, but often the best way for the "best results".......

Keep us posted...

PS.... Kids are pretty easy to relocate..... they seem to go with the flow of things if they know the reason WHY....

[SJM]

.

[nomoneynomore]

I would say option 3, renting would be your best bet. If you have even a slight idea of moving, it makes no logical sense to keep either home. When the time comes, you would be stuck with that mortgage if it doesn't sell well. That would be another red flag on your credit to still have that after the bk and would work against you when purchasing a new home elsewhere. I would rent and save as much money as possible to purchase a home in the future. By that time, hopefully interest rates would be down, and with a downpayment & your bk being a few years back, you could get a much better deal on a new loan.

[Cali]

I would say let both houses go and rent.

[deafbroke]

The way I see it the best two choices are either move back into fixed rate home and let the one you're in now go to foreclosure or let both go and rent. You do not want an adjustable rate. get rid of it ASAP. If you do not want to move back into old home then let both go and rent.

DB

[JRScott]

Okay having read what you wrote.

Move back to the first home and live in it.

You've already admitted the second home is more than you can afford. Let the second home go in the bankruptcy.

Make sure you can cover the equity in the first home with your state's exemptions.