Should you save your home from foreclosure?
I often have clients ask if they can save their home from foreclosure with bankruptcy. Sometimes, through bankruptcy filing, the answer is yes. However, I think that the better question is “should I save my home from foreclosure”.
Here are some factors to consider when deciding whether you should keep or surrender your home:
-Can you really afford the mortgage payments? Your mortgage payments should total about 25 to 30% of your income.
-Is your interest rate scheduled to adjust? It may be that you can afford your payments now but maybe not once your payments adjust.
-Do you have negative equity in your home? If you owe $300,000.00, but your home is only worth $150,000 now, you have negative equity. You are essentially renting your home as you are not building equity, and it may be a good idea to let the home go.
-Is this where you want to live for the indefinite future? If not, perhaps you should use your financial problems to reevaluate where you want to live. Take advantage of the fresh start that can be offered by bankruptcy.
A too-big house payment can, at the very least, leave you with too little money for other goals: retirement, vacations, college funds for the kids. Bankruptcy might help you save your home, but it can also give you a fresh start if you your mortgage payments are just too large.