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?
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