Ok, I need to write about this (my house and my mortgage) for two reasons. One, if I keep it inside anymore I think I may spontaneously combust...and two, I need some advice.
Here's the back story: In 2006, I purchased a very cute little bungalow in Worcester. I adore this house. It's a place that I fell in love with from the first time I saw the photos on the MLS listing online. It's simply beautiful.
At the time, I was employed at the college and also shooting weddings, making about $70,000 a year. I had been HONESTLY claiming all income and prepping my taxes for SEVERAL YEARS in advance of this purchase, so that I would look as good as I could when it came time to apply for a mortgage.
In December 2006 (in hindsight, this was the height of the market...it crashed a few months later) the sale was approved for $216,500. I didn't actually have enough money for a down payment, but as a first time home buyer, that was apparently ok. I got 2 mortgages, an 80 and a 20. 100% financed. The 80 is at 6.37% and the 20 is at 8.7%. I did not realize at the time that these were astronomical figures. My final mortgage payment came to $1,756 a month. (I took what saved money I DID have and made some home improvements instead...the roof, refinishing floors, chimney work, etc)
For a few years, all was well. I paid all my bills, traveled, had my pets and my hobbies. It wasn't until the fall of 2009, when I left the job at the college to pursue wedding photography full time, that the trouble started. Knowing that this would essentially cut my income in half, I proactively took steps to keep a handle on my monthly expenses. I prepped the house for a possible sale, but by this time the assessed value of the house was about $135,000...and I owed about $200,000. (The difference NOW is about $40,000. A slight improvement)
So I'm under water. Or upside down. However you want to term it. But I'm under water by A LOT of money. I consider my options. It seems to me I can either walk away (declare bankruptcy, ruin my credit, etc) or I can rent it out and someone ELSE could (in theory) make my mortgage payment. Not wanting to damage my credit, I rented it out. There were still losses, and occasional huge expenses, but I shrugged and took responsibility for it all, while the whole time paying to live elsewhere...while I waited for the market to improve so I could at least break even on a sale.
Over the last 5 years, I've occasionally made inquiries about what I should do...could do...to keep a handle on this. I've talked to bankers, lawyers, and financial advisers. I'm able to pay my bills, but things are uncomfortable. I've recently made some decisions that ultimately will be beneficial- getting a roommate, paying off my vehicles, paying off credit cards. My credit score is stellar. It's well over 800 and I'd love to keep it that way. I may have my moments when I freak out about money, but overall ON PAPER it looks like I'm fine.
I'm NOT fine. I lose between $300 and $500 on the house every month. I've been using the credit cards again...winter is slow for weddings and things still need to be purchased each month- food, gas, unexpected expenses. Two years ago, I acquired a horse...otherwise known as a "hay burner". At $7 a bale for hay, he's practically combusting, himself. (BTW the horse is getting a job by going to summer camp this year, so for a couple of months, I will have no horse related expenses. But this will only buy me a little time. Literally.)
Something needs to be done.
But the banks all look at my records for current income, monetary obligations, and payment history...and tell me I can't apply for refinancing for three reasons. One, I don't technically make enough money anymore to get another mortgage, like...ever. Two, because I no longer LIVE IN MY HOUSE, apparently the rules are different for rental properties. Three, I have BEEN MAKING all my payments. In full and on time.
Now, my incalculable powers of deduction leads me down the following path: The only way I'll ever be able to change the payment situation for my house is to NOT make the payments. Or at least not make the full payment. I am so incredibly sick with worry over this I will probably give myself an ulcer.
My credit would be shot, but I'd finally get a bankers attention, wouldn't I? At that point they would start the process of refinancing, modifying, whatever they call it. I may or may not get a lower monthly payment.
The options are dizzying. It's a cruel irony that in order to initiate the loan modification process I have to begin defaulting on my mortgage.
I realize that everyone has their own money woes. We all make our own choices, we all deal with the consequences of those choices. We can talk ourselves into pretty much anything if we want it badly enough. Our perspective becomes clouded. Choices and options become like dominoes...tip one over, and they may very well ALL tip over.
I don't want to ruin my credit.
I don't want to be a landlady.
I also don't want to keep making bad decisions.
I need to make the BEST POSSIBLE DECISION...and I need to make it RIGHT NOW. My current tenants are moving out next month, and I either have to rent it again, or move back in myself and aim for refinancing. My roommate has also given notice, she will be moving out next month, so I'd be assuming the full rent on my apartment (challenging) or have to get another roommate.
So, do you see the dilemma?
Stay in apartment...get a new roommate. Continue to rent out my house and lose money every month.
Or move back to house...but be unable to make full payment...and start legal process for ultimate outcome. Ruin credit.
Advice is welcome.
ADDED IN: My ex husband asked me today why the credit score matters so much to me. And he's right...in the grand scheme of things, I will figure out how to do what I need to do to live...and the score is just a figment...a creation. And why was I investing such power in it? Good point. But every ounce of my existence fights the idea of NOT paying the full mortgage each month. The credit score after effect is a sub-set concern. Sorry if this is all too much to be sharing, it's just hard having both apartment AND house issues happening at the same time...and it affects not just me, but makes ripples that will affect other peoples decisions, too. The world is NOT falling. I'm sure I'm over thinking it.