Posted on: 06th Jan, 2009 12:36 pm
We are in the second year of a 10 year interest only mortgage. Our property value has decreased by at least half. We have no equity in the home. We are considering walking away, or doing a short sale on the property. Our payments are current, we both have credit ratings of over 720. if we keep payments current on credit cards, and let the house go, how will this effect our credit ratings, and how long would it take to get another mortgage?
Hi underwoodward!
Welcome to forums!
Walking away from the property is not a solution in my opinion. If you walkaway from the property then the lender will foreclose on the property and sell it off to recover the debts. If the sale results to a deficient amount then the lender will ask you pay that. Moreover, a foreclosure will badly affect your credit score and will lower it by 250 points. A foreclosure may remain in your credit report for at least 7 years and you will face problems in getting mortgage during that time.
A short sale is a better option in my opinion but you should note that as you are current on your payments the lender may not accept your application for a short sale. Lenders generally accept a short sale option only when you are delinquent on your payments. I would still suggest you to speak to the lender and check if he allows it. In case if a lender allows a short sale, you will have to pay the deficient amount resulting from the sale and your credit score will be lowered by 75-100 points.
Feel free to ask if you have further queries.
Sussane
Welcome to forums!
Walking away from the property is not a solution in my opinion. If you walkaway from the property then the lender will foreclose on the property and sell it off to recover the debts. If the sale results to a deficient amount then the lender will ask you pay that. Moreover, a foreclosure will badly affect your credit score and will lower it by 250 points. A foreclosure may remain in your credit report for at least 7 years and you will face problems in getting mortgage during that time.
A short sale is a better option in my opinion but you should note that as you are current on your payments the lender may not accept your application for a short sale. Lenders generally accept a short sale option only when you are delinquent on your payments. I would still suggest you to speak to the lender and check if he allows it. In case if a lender allows a short sale, you will have to pay the deficient amount resulting from the sale and your credit score will be lowered by 75-100 points.
Feel free to ask if you have further queries.
Sussane