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Facing unemployment & foreclosure

Date: Mon, 05/28/2012 - 10:57
Submitted by on Mon, 05/28/2012 - 10:57
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I'm 50 and we all know at work that layoffs are around the corner. Unemployment will not cover all my living expenses and I will risk losing my home.
I've been in my house for 20 years. My ex and I refinanced a few times during our marriage extending the length of the loan. 12 years ago we filed bankruptcy & divorced shortly after. I got the house and have struggled to make the payments ever since - $835 per month. Several times, due to lack of child-support and job loss, I've had to do a loan modification to avoid foreclosure. We purchased the house for 100K, the principal is now 88K & I still owe for another 25 years - I'll be 75 before it???s paid off. As of now we have paid over $200K in interest ??? paying another 25 years means paying another $200K in interest. If I lose the house renting a place will be just as much - so pretty much no matter what, paying my mortgage or rent is a huge financial burden - especially when unemployed.
Once I???m laid off I???m considering cashing in my 401K (55K) & purchasing a ???short sale??? house similar to mine a few blocks away for 45K and walking away from my mortgage. My credit is already shot, so no loss there, and no mortgage payments means I can live on unemployment without any worries of losing my house. Once I find a job I can rebuild my 401K with money that would otherwise go towards a mortgage or rent payment, as well as have money on hand for emergencies. Should I ever need credit down the road for major home repairs, I now own my home outright, which I would think might make getting a home equity loan a little more feasible despite bad credit.
But - - are there any other things I might be able to do to keep my current home? I???ve read a little about ???cash in??? refinancing and also negotiating a lower principal balance. Considering my circumstances and the possibility of facing foreclosure, would I have any luck getting them to reduce the principal balance and then use my 401K money to do a cash in re financing (if that???s the proper term)? Is there anything else I might try or consider?


I am not adequately equipped to answer your query in detail but what I can tell from my own experience is this: Cashing in your 401(k) at 50 years of age does not sound like a good idea. Assuming that you would find a job straightaway, you will have another 10-12 years on the job. I don't think you can rebuild your 401(k) just as well.

Other than that, getting a HELOC with a poor credit score would be pretty tough. The bank is really not interested in claiming your house. They would rather have you pay them off than anything else.

I hope another forum member will come along and advise you on the rest of your queries.


Submitted by NathanielCopeland on Mon, 05/28/2012 - 23:37

NathanielCopeland

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I'm aware of the taxes & penalties and am prepared to deal with them.
A roommate is not an option - I still have kids that live with me, one is going to college next fall, and my son comes to stay every Wed & every other weekend when he has his daughter.
A little under $400 per week in take home pay is all I would need to cover all my living expenses if I did not have a mortgage - that includes all utilities, food, gas for my car, my car payment and putting money aside each month to pay property taxes & homeowners insurance. The short sale accommodates this income.
Not acting on this opportunity means I will very likely lose my house and then I will wind up paying even more money for a place to live as rentals near me are typically $1,000 per month - I'll then be paying rent to someone for the rest of my life.


Submitted by on Tue, 05/29/2012 - 05:23

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