If we buy a new home and foreclose the other one we have, what is the risk there?
Our mortgage payment is going to $3000.00 in January for a home that is now valued at $175,000. The payment goes up as the value goes down. There is no sense in that. A friend adviced us to buy a new home before we began to struggle with the new payment and then foreclose the one we have. I just want to know how does that work and what is the risk. Can we also loose our new home because we foreclosed the old one?
I just want to clarify that I am not trying to cheat the system. My husband and I make about $4,000 a month combined and $1,000 for debt, bills, gas, insurance, food IS NOT going to happen. We have thought of other options. Some people can afford it and some just cant AND TRUST me the lender is not willing to work with us. We would keep our home if they were to do an interest freeze, regardless of the loand, but they'd rather foreclose. If our payment stayed at what it is right now. I WOULD KEEP MY HOUSE. We have added so many things to it. To see it go because of a struggling economy and stubborn lenders is sad.
- David BeasleyLv 41 decade agoFavorite Answer
Yes! Buy yourself a new house at a lower price!
I closed 2 purchase deals like you are talking about last month. The people knew their payment would go up dramatically, so they bought a foreclosure down the street.
In both cases, the loans were FHA where the seller (bank) paid their down payment and closing costs. They had to qualify with BOTH mortgage payments (by getting a lease on their current place), both closed putting $1000-$2000 into the new house (appraisal, new ins policy, inspection, credit, earnest $, etc).
Each loan is its own entity, so the new lender will NOT know about the old loan going bad. The old lender can not pursue you for the new house, but they can seek damages for the deficiency (unpaid balance after they sell that house). This is unlikely, but you may get a 1099 from the old lender (the $ amount unpaid after the foreclosure can be considered taxable income).
Worst case is that you will owe some taxes, and your credit is shot for a few years. BUT have a lower fixed rate payment on a house you like AND you can afford the payment. It has equity (or will when the market comes back). You didn't put much $ down! Contact a mortgage broker to get qualified today!
Best of luck!Source(s): Mortgage professional.
- 1 decade ago
I'll have to assume that you have an adjustable rate mortgage.
Have you talked to your lender or any lender about refinancing at a fixed rate?
Why is the value of your home going down? Location? Condition?
How long have you owned the home? How much, if any equity do you have in the home?
As the other responders have quite correctly pointed out, you would have to be able to qualify to carry both this existing mortgage, plus the mortgage on the new home.
Talk to your lender, most lenders really DO NOT want to foreclose on homes they would much rather work with you and get their money.
If you don't want to live there any longer, see about refinancing at a liveable payment amount, and then try to sell the home.
Foreclosure will go a long way toward making another home purchase tremendously difficult.
- Anonymous1 decade ago
No you can't do that. If you buy the new home first and you foreclose on the last one, the bank can come after you. Try to sell the old home for a loss if you can, then buy a new home. Or find a place to rent and then foreclose. Afterwards you can buy a new home.
*You can't just foreclose because you don't like the payment, there has to be a hardship.
- 1 decade ago
First of all you have to qualify to make both of the mortgage payments if you are going to purchase a new home. You will also be required to make a down payment on this home, so you should really try to sell the home. You might want to consider a short sale on the home you own currently. People leave their homes all the time & purchase new ones letting them go into foreclosure. A lot of people must do this for their jobs out of state etc. If you are currently behind on your mortgage payments, it will not be that easy to get into a new home.
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- jamie5987Lv 41 decade ago
that's ridiculous advice. first, how are you going to get approved for another mortgage while you are still carrying the first mortgage? And are you so willing to ruin your credit rating by defaulting on your first mortgage? why don't you try to sell your current home now and then buy something smaller later?
don't listen to stupid friends anymore.
- 1 decade ago
You should got to www.gateslending.americanmmg.com it's free and you might find that you can get a better rate with lower payments. They have the lowest possible interest rates.
- lilyLv 44 years ago
Dave Dale and Jamie Williams posted the same question. You should read the answers side by side.
- Scott KLv 71 decade ago
It might work if you can convince the bank that you can afford making both payments, and if you can do that, they are still going to get their money.
- chanaLv 44 years ago
thanks for the answers EVERYONE xx