Did you purchase your condo during the height of the market?
Has your family or your lifestyle changed?
Do you feel that there are no options out there for you?
I am here to tell you that I deal with these situations almost on a weekly basis and you DO have options. When you feel totally stuck, it is hard to move forward and see the light at the end of the tunnel. One of the things that I enjoy most about what I do is to talk people through their options. Each scenario is different and thus each solution is unique to the circumstances.
Are you staying local?
How is your credit?
Do you have ANY equity in the condo?
Can you afford to carry both the condo and a new home?
Are you employed?
Do you have other assets…401K, Savings, parents, etc.
What is your current interest rate on your mortgage?
What other debt do you have?
What are you long term financial goals?
As you can see, there are many, many combinations of goals vs. financial ability. I have counseled four couples recently with 4 very different outcomes.
Scenario One– This couple had a 2 bedroom condo which was “under water”. Since they had purchased it their family had grown from two to four. They had bought it for $250,000 and today’s value was $180,000. Because they did not have a 75% equity position in the condo they could not use any potential rental income to offset the mortgage cost. They did, however, have excellent credit and great income. They had very little money saved but could tap into a 401K. Since they had no equity in the condo they could NOT refinance into a lower interest rate. The carrying cost exceeded the amount we could rent the condo for.
Their Decision–RENT AND BUY We rented the condo at a monthly loss of about $150. They are going to pay down principal as fast as they can and with future appreciation they will refinance when they can. They are planning on keeping the condo for 20+ years as a passive income stream in the future. They could qualify for carrying BOTH the condo and their next home so they purchase a modest but nice 4 bedroom colonial using a VA loan with NO money down. The Seller paid most of the closing costs.
Scenario Two- This couple had suffered a job loss and although they had stayed current with their mortgage, their credit had dropped to the low 600 level. They were living in a 2 bedroom condo and their two children needed more room and a yard. Although their condo had lost considerable value, after I did an opinion of value and a net sheet, they had about $20,000 worth of equity.
Their Decision-SELL AND RENT This couple is going to sell their present condo and with the equity pay fees (2 month security, 1st month rent) in order to get them into a suitable single family home rental in the town and school district that they want for the children. They have upward mobility now with new jobs and they will save and re-establish their credit in order to buy within the next two years.
Scenario Three- This couple had a job opportunity out of the area. They had lost considerable equity in their condo and did not want to “cash out” and loose money. They had bought the condo at a 6% interest rate.
Their Decision- RENT AND RENT- Since they had enough equity still available, they were able to refinance to a 3.5% loan and thus realized a $300 profit from renting. They are planning on continuing to use the condo as a rental for at least the next 5 years until they can get back what they put into it. They moved to their new job location where they are renting a home. They will probably have saved enough to purchase within the next 2 years.
Scenario Four- This couple had some bad luck with job losses and some medical bills. They too were “under water” on their condo.
Their Decision- SHORT SALE AND RENT- Since they could demonstrate a “hardship” (job loss, divorce, medical issues, death) they could qualify to do a short sale. We sold the condo well below the mortgage amount. The bank “forgave” the difference. Of course it hurt their credit. With a family member as a guarantor on the rental, we were able to find them suitable housing. Since that time, they have found jobs and within two years will qualify to purchase once again.
I could go on and on, as there are as many solutions as there are people who feel that they cannot get out from underneath their condo. My job, as a Real Estate COUNSELLOR, is to get people from where they are to where they want to be. Call me for a FREE consultation to help you to define your housing and lifestyle options. Linda McCaffrey 203 994-3666