Question: My husband bought a condo (Interest only loan) a few years back before we got married. It is now worth less then half of its value, therefor we couldnt sell it, and was too small for us to live in it together. We ended up buying a second house together and was planning on renting out our condo. With our bad luck we have not been able to find a renter, so we have been paying on 2 mortgages. It is getting to the point where we can not afford both, and if we don’t get a renter soon we will have to foreclose on the condo or short sale it. My questions are as followed:
1. Will it affect my credit even though I didn’t purchase the condo or sign a contract. Only my husband did?
2. Can the bank go after us if we foreclose or short-sale? Can they take our current home?
3. Will we owe taxes on it and if so is there ways of reducing those or getting around them?
4. My parents co-signed on the new house, can this effect their credit, or can the bank go after them?
5. Lastly my husband has an HOA fee on the condo as well, can they come after us if we stop paying that? Can they garnish our wages.
Thank you for all of you help!!
Answer: –
1. It will only affect the credit of the person who’s name is on the loan, not the title. So in this case, your husband will be the only one who’s credit is affected if the property goes into foreclosure or short sale.
2. The bank can come after you (deficiency judgment) if you foreclosure or short sale…however they typically don’t. More than likely they will just 1099 you for the difference and count it as income. They can’t take your current home unless you pledged it as collateral in order to get the condo which you didn’t since you bought this home after the condo.
3. As for the taxes, yes you will most likely be given a 1099 for the loss which counts as income to you on your taxes. Depending on the situation, you may be able to use IRS form 982 which will counter act the 1099. You will need to discuss this with your accountant. As for property taxes, those will be taken care of either by the bank if they take back the home when it goes through foreclosure or even a short sale.
4. Because these are 2 separate transactions and homes, and was not used as collateral, they cannot do anything to your parents.
5. Yes, they could file a judgment against you as well…but more than likely they won’t.
My sister is in a bad situation. She has 2 mortgages on her home. I don’t know if the 2nd mortgage is with the same lender as the 1st. She has had her home up for sale for 6 months with very few even looking at it. The house is almost 30 years old and needs a lot of repairs. She filed Chapter 7 a few years ago. The IRS has threatened to put a lien on her house for back taxes that she owes. Even if she could sell her house I don’t think she’d get anywhere close to what she needs to pay off both mortgages. What would happen if she just moved out and let the bank have it?
That depends on what state she is in. The bank has the option of filing a deficiency judgment or counting the loss as income 1099. Deficiency judgment is where the home forecloses but the bank still comes after you for the difference.
It’s generally never really a good idea to let it just foreclose, especially when there are many “better” options out there.
Lindsay
To talk or not to talk…that is my question.
My husband and I have a condo near Vegas. We got it as an investment. We paid 334,900 for it and owe 301,000 to GMAC. It is a perfect place for someone who does business in Vegas because it rents about a third of the year. But we don’t need it for that, and it is draining us. My husband is still working, but all his retirement money is going to keeping on top of all our real estate.
The problem is, his Multiple Sclerosis is worsening with the stress of his job and all the mortgages. His new symptoms are scary. We don’t know how long he will be able to work… I am retraining to find employment. We are trying to be proactive and do something now, before he loses any more function.
Do we try to talk to GMAC? Are there any real people there who will listen? Will they consider health a hardship ? Do we not talk to anyone and just stop payments and foreclose> We have been advised both ways…Are there any buyers out there for a short sale at Lake Las Vegas? Has anyone had any experience with GMAC?
Thanks, Pegasus.
Yes, most definitely talk to your lender. If they will work with you to accommodate your situation, that is the number 1 best option available. Health is a valid hardship, but you must communicate that with them. Again, its important to keep in contact with your lender.