Underwater Mortgage - Need Advice

[Raekwon]

I'm looking for any and all advice regarding this situation. We bought out in the great ol town of High River 4 years ago this month during the height of housing prices. We are in a condo and town we no longer wish to live in but the problem is that places around us are foreclosing like crazy driving prices down to the point where drastic action may need to be taken.

As of right now we owe roughly $285,000 and the places around us are listing at $129,900 - $150,000. What options do we have?

[squiggs96]

Luckily, according to Realtor 1 and 20% of CP, that $285,000 isn't debt.

[bluck]

To be honest I would probably try and rent your place out... use the rental income to pay your mortgage and use the money you would use for your mortgage to rent somewhere else. Just my 2 cents.

[albertGQ]

Man. If I was in that situation, I'd be tempted to just walk away.

[Travis Munroe]

^^^ many people in that situation do walk away. Next thing you know you have a empty condo complex, red flagged and buyers come in and get an even better deal as they are forced to put 20% down.
For the record, I am not giving advice on the situation and suggest speaking with a financial adviser but you need to decide:
a handful of years of hurt credit followed by a rebuild with a possibility of buying again in under 10 years or payments on a property for another 20-25 years that equal double what the place is really worth.
If you can rent it out and come close to breaking even, that is obviously an ideal situation although I have a tough time thinking that the rental rate will even come close to paying for the mortgage, taxes, condo fees etc.

but luckily, squiggs came in after you posted about a tough situation in your life and really contributed to the thread.

Good luck, your not alone...I pull titles on the regular for properties worth 50-75% what the owner paid during the boom.

[ken0042]

Random thought- would a bank ever "forgive" part of a debt? Obviously what I see on TV may not apply in real life; but I would think given the choice they would rather lose say $100K as opposed to $150K.

Is the real issue with the condo that you don't like living there? Or you don't like the choice you made? (I'm not judging; just asking.)

[Raekwon]

Originally Posted by ken0042

Random thought- would a bank ever "forgive" part of a debt? Obviously what I see on TV may not apply in real life; but I would think given the choice they would rather lose say $100K as opposed to $150K.

Is the real issue with the condo that you don't like living there? Or you don't like the choice you made? (I'm not judging; just asking.)

It was never a plan to stay here forever, obviously we wanted to upgrade in time. We don't like it here but would suck it up if it didn't seem like a wasted effort. Don't wanna stay here for 10 more years to find out we haven't even broke even.

[Canehdianman]

Mortgages in Canada are full recorse nowadays. No more walking away.

[Rathji]

I bought during the same time frame and seeing those numbers I am a lot more comfortable with my situation.

[CaptainCrunch]

Originally Posted by albertGQ

Man. If I was in that situation, I'd be tempted to just walk away.

I don't think that's an option.

I would almost think that you would have to declare bankruptcy after walking away, and if the CMHC decides to come looking for you, you have to prove that you declared bankruptcy and the CMHC was notified of your bankruptcy.

Good article that explains at the bottom

http://www.financialpost.com/persona...374/story.html

n Canada it’s pretty tough to do. For starters, if you have an insured mortgage, backed by the government, the bank will get paid off for their loan. But the insurance company, whether it’s Canada Mortgage and Housing Corp. or a private insurer, will go after you for any deficiency created by proceeds from the property being less than the mortgage.It’s the case in most of the country for uninsured mortgages too, says John Turner, director of mortgages for Bank of Montreal. Rules are slightly different in Alberta and designed to protect consumers but Mr. Turner says banks can elect to go after other assets in some circumstances.
There’s also a scenario where you might have bought a condominium as an investment before it was built and put down say 20% payment. If you think you walk away should prices drop by 50% once the building is up, forget it. You’ll be sued.
“As a lawyer we can’t advise someone to break a contract. The law is not you don’t have to obey it, the law is the consequences of not obeying [the contract],” says Calgary lawyer Jeff Kahane. “You haven’t broken the law, you’ve broken your promise. Is it any different than saying why would I want to pay for a chocolate bar at 7-11 when I can put it into my pocket and steal it if I can get away with it.”

How the power of sales or Foreclosure works in Canada?

So what should you do if you find yourself on the brink of foreclosure? Well, for starters, it’s helpful to recognize that, unlike in the U.S., you don’t have the option of mailing in your keys and walking away. In Canada, the mortgage debt is the homeowner’s – not the lender’s – and the lender can do whatever it takes to get that money from you, including garnish your wages. As a full-time Canadian real estate investor, you should be aware of the downsides to a loan or mortgage.

[afc wimbledon]

Originally Posted by ken0042

Random thought- would a bank ever "forgive" part of a debt? Obviously what I see on TV may not apply in real life; but I would think given the choice they would rather lose say $100K as opposed to $150K.

Is the real issue with the condo that you don't like living there? Or you don't like the choice you made? (I'm not judging; just asking.)

The banks have no interest in forgiving anything as it is insured, they are better off if you declare bankruptcy and walk.

Which is, incidently about the only other option, if it is about moving then you rent it out (no doubt eating a portion of the payments).
For future reference condos are a lousy investment, I'd rather buy a tar paper crack shack on its own lot than the nicest condo in town.

[Flames89]

If you have to move and have little faith in the rental market for say five years (natural gas will come back, and High River will then be back to rocking), then look for a house where you want to live (longer term) and work with your bank to refinance while selling your old home.
Talk to your bank. You are not alone in this situation. You got in it, work your way out of it.

[Red]

Unfortunately you have limited options. Bankrupcy (can't walk away from a mortgage unless it is conventional) or tough it out.

I would be careful with thinking that Hight River will rebound. Why would it?

[Northendzone]

I have no advice to offer, but that is a stunning drop in the price of the condo.

[Misterpants]

What a depressing thread. Sorry for your situation Raekwon, I hope things work out OK.

[Red]

Originally Posted by fotze

I don't know anything about bankrupcy. Why can't you walk away from a mortgage here?

Also with bankrupcy, can you just declare it or do you have to get rid of your other asssets first like savings or RRSP's?

If you have a CMHC mortgage you can't walk away from a house in Alberta. In all other provinces you can't walk away period.

Not too sure about the bankrupcy laws, but I imagine you are left with only necessities until you are discharged (1 year?). I imagine that your savings would go to the creditors and you can file it anytime you want.

[loob job]

I know it says you no longer wish to live there but you may have no choice but to stay there and wait it out until the market bounces back and you can get your money back or close to it, even if it takes 10 years.

[Slava]

If I was you I would talk to a legit credit counsellor. I would recommend www.moneymentors.ca as they're nonprofit and will go through your options with you. There are other options under the bankruptcy act, and perhaps something else might be more fitting for you. I really don't know, but they will.

Another option is to PM sweetdoc here and he might be able to help you with some information.

I don't know your whole situation, but I think I would be much more tempted to declare bankruptcy as opposed to a decade of hoping it turns around. I don't think I can really say that though because I'm not in that situation and haven't had to make that call myself.

Good luck though!

[Red]

Originally Posted by Slava

If I was you I would talk to a legit credit counsellor. I would recommend www.moneymentors.ca as they're nonprofit and will go through your options with you. There are other options under the bankruptcy act, and perhaps something else might be more fitting for you. I really don't know, but they will.

Another option is to PM sweetdoc here and he might be able to help you with some information.

I don't know your whole situation, but I think I would be much more tempted to declare bankruptcy as opposed to a decade of hoping it turns around. I don't think I can really say that though because I'm not in that situation and haven't had to make that call myself.

Good luck though!

Same here. And let's not forget that the US is in year 6 of their crash and they are not even at the bottom yet. Could be 15 or more years before a place like High River rebounds just to break even.

Life is too short for that.

[freedogger]

My only suggestion is to take any moral considerations out of it. Don't feel any guilt about this. Make it solely a business decision or what makes sense just on financial terms. Seek professional advice as others have suggested to identify as many options as possible. Which option will leave you in the best spot in X years? I really think taking a 90k investment loss may not be as bad as some of the other options, but I certainly don't have all the facts.

I really struggle with the buy vs rent debate. I could easily see us and many others under water at some point in the future if the economic conditions go south enough.