Two mortgages...need help w/ decisions....

barbara_gOctober 2, 2009

My husband and I are so close emotionally to all these facts, we've decided we need a more objective opinion. We're a one-income family (not a great income either!) of four with two mortgages right now. We originally lived in a small house with a small mortgage (75,000) then decided to build to be closer to my mom in her eighties. New construction went over budget and current home mortgage is 179,000.

When we realized the new house was going over budget, we decided to keep the older home and rent it. An okay decision for a year, but even renting the home for $200 more than the payment and both husband and I working part-time in addition to his full-time, we were barely making it.

In the meantime, our renters moved out in February, we had a traumatic death in family in March, another death in June, and we're exhausted both physically and emotionally. Finally, I had to stop working since my children needed me due to all the ongoing stresses in our lives.

Being objective and only thinking of the money, it seems wise to sell the more expensive house and move back to less expensive...if we can even sell in this market. But new construction is on family land near my mom, etc...a lot of emotion there.

We did meet with a realtor at the older home and she felt like the home would not sell for much more than our current mortgage so it's not like we could make a lot of money to help pay for the newer home. We had a couple of interested people for a lease/purchase, but they basically wanted to move in with no down payment, etc. Again, not very helpful for our situation.

We are paralyzed in this situation but need to help ourselves soon before it gets worse. I would welcome any advice on how to think through this decision. ~ b

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Although there is a lot of info there, its hard to say if its enough to offer much of an opinion.

1) can you afford the more expensive home, assuming the other one isn't draining you?

2) selling the less expensive home, to get essentially what you owe, isn't the worst thing in teh world. It will help assuming you have had it vacent for a while and are paying for it. If you can rent for the mortgage amount or more, that would be eseentially cash neutral.

3) if you can't afford the larger house on your current income you need to do something. can you make yourself a 2 income household? is there someone in your family who is looking for a place to stay and can contribute to the household?

If you can't afford it, can't take get a second income, and there is no one who can help you, and there are no future prospects of significant additonal income, you HAVE to sell the larger house.

could you do daycare for a neigbor or family members child for some additonal income each week?

    Bookmark   October 2, 2009 at 11:21AM
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Make sure you check the tax implications of selling either home before you do anything. Turning a residence into a rental changes things.

    Bookmark   October 2, 2009 at 11:38AM
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I'm so sorry to see you in that situation. It's a shame that you have no equity in your first home. That would have helped to reduce your mortgage on the new home. My first question is whether the home you constructed is completely finished off. They aren't always when you move in, if you need the income from a rental. Is the reason you decided to rent out your first home based on difficulty in selling it then? You really don't have much guarantee in this market whether either home will sell for what you have in it, and that's the zinger.

If you moved to be close to an elderly relative, and your new house is large enough, what are the possibilities she could live with you? My elderly mother was able to stay in her own home with care from me and my daughter ....... well past when she would have been able to do it independently, but in the end, when she needed 24 hour care, the move to my residence had to happen anyway. I wish for you that your mother doesn't need to do this, but if it looks inevitable, it may be a solution for both of you to do it sooner, rather than later.

I appreciate not wanting to sell off family property. It's the last thing anyone wants to do, and sometimes upsets other family members who do not want a "?" living in their midst on previously owned family land. If you could not make ends meet when you were realising rental income, you won't be able to when you are not and you are wise to try to face the situation as quickly as possible before it gets out of hand and you lose one or both properties.

If you sell the rental, are there any programs available to help you reduce your mortgage payments on the new property to a more comfortable level? I haven't kept up with that for awhile.

Good luck.

    Bookmark   October 2, 2009 at 5:32PM
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Thanks so much for your thoughtful responses...we sincerely appreciate it.

Our new home is still not large by most standards (3 bedroom/2 bath about 1650 sq. ft. and that includes a screened porch).

My mother has no plans to move in with me or my other siblings unless absolutely necessary. My other siblings both have larger homes so she would probably choose to live with one of them.

I have a nephew that recently bought a home...tried to get him interested in the new house, but he wanted to move father out plus the price was too high for him.

We rented the older home when we realized that the new construction was expensive and maybe out of reach....just in case we needed something to fall back on. I don't think we could find another house with such a low mortgage anywhere now. That's why I can't believe the equity would not be more! True, the house is older and needs a little tlc but nothing compared to some places we've seen. Plus the house has acreage (almost 4 acres) so it's not like a subdivision home where houses are similar in style and price, etc. I'm planning to check with another realtor today to see about the price.

I did try working part-time, but basically worked to buy more convenience type groceries since I wasn't here to prepare meals. The pay was low and generally just not worth the gas, etc. Plus due to the deaths in our family and stress, my kids needed me at home....especially since my husband was already working two jobs.

We did try to get the newer home refinanced, but were told by more than one bank it wouldn't be worth the closing costs, etc. to refinance. We actually had one bank telling us no one is qualifying for these loans except people with outstanding credit and higher income....this was about 6 months ago. Worth it to try again?

I feel that we really can't afford the newer home unless we do become a two-income family and even then it would take awhile to re-establish myself in the job market. I have a college degree, but haven't worked full time since having my children. Even so, in this job market, I would probably not be competitive with someone with recent experience. Just my rambling thoughts.

Thanks again. I guess the emotional part of owning the house and selling it when it's on family land is the most difficult part to me.

    Bookmark   October 3, 2009 at 12:40PM
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I would check with a couple of other realtors. Seventy five thousand seems awfully cheap for a house with four acres but I don't know where it is or what the house is like so it's possible. If you need to sell it could you fix it up a little? Paint and cleaning can do a lot to make a house look better.

    Bookmark   October 3, 2009 at 2:19PM
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I had one other thought, I suspect you all have already entertained. Have you thought about leasing the new home and moving back into your older one? Along with the housing glut and crash here, the rentals are abounding, but I have noticed that the new homes are still moving on the lease/rental market at substantial rents. When I moved here from a more metropolitan area, in a professional position, it was IMPOSSIBLE for me to even find any homes comparable to what I moved from to rent. I was obliged to buy a house to put a roof over our heads. People in really good jobs relocate and many of them prefer to find a nice new home to move into to give them time to see if the job pans out, or to look at properties to buy.

You may cringe at thinking of leasing out a brand new house, but it may take the boulder off your shoulders for a year or two, as you do that TLC on your original home to eventually sell, relieve you of a high mortgage, and wait out the market to when houses are selling. You may want to list a lease like this with a realty property managing company, or one who specialises in relocations, or even consider ads in the closest metropolitan paper. Might attract retirees wanting to get out of the rat race.

    Bookmark   October 3, 2009 at 6:28PM
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Since you are a one income family and have yourself stopped working to spend time with the kids have you considered taking in a foster child? Or even a foster adult? If you are a good fit it would be a good way to stay home and still live in the bigger house. I'd sell the older home even if you had no equity and be done with it.

    Bookmark   October 7, 2009 at 4:02PM
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We are going thru almost the same exact situation. Our new build isn't big either, 1800 sq ft...400 more then the old house. I can't leave my parents at this point, I have to protect my family & my nerves!!! I didn't seem bother DH as much as it did me!! It has made me sick, I puked my coffee every day!! Our CMA from a great realtor showed we would be asking the bank for a short sale. I didn't want that to happen, we decided to sell the house ourselves to save on the realtor fees. We did it in less then 60 days & it wasn't a short sale either. While we didn't get enough to pay down the new house mtg. (as it would have 3 years ago) we got that monkey off our backs which I will tell you, as this only happened last week, has been like a miracle...*sigh*!! It doesn't solve all of our financial problems (I have college but haven't worked in 10 years for the kids either) but just knowing that the extra payment is gone, the extra insurance, electric & others is a HUGE relief. Geezz, not THINKING about the old house has done wonders for our family!! You'd be suprised just how much you guys are paying to keep that extra home beyond the mtg. payments!!
SELL IT. Cut your losses then circle your wagons. I have a feeling we'll all be okay...eventually. Like you I wanted to sell the new house & move back to the old one but really, the old house sold because it was in first time buyer range, the new house would have been on the market for a while.

    Bookmark   October 7, 2009 at 10:12PM
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