Greetings to Fooldom, I just got ahold of some new orders. I will be going from FT. Carson, Colorado to Ft. Hood, Texas 3 months after I get back to the states. I do have a bit of a situation, though. I own my house and it happens to have a second mortgage attached to it. The principle on the first mortgage is what the house is worth (I just got it a year and a half ago) which is around $190,000. I have a couple of options:1.)Sell the house and try to get some kind of credit to cover the second mortgage ($42,000). I have connects at a small town bank that I have the consumer loan with. I don't even know if my income will cover the min payments of the loans.2.)I don't know the laws about this, but rent the house out and see if I can't float the 2nd mortgage until I can get the snowball around to it. I have the financing through the military and I don't know the clauses attached to renting a house through a VA Loan, but I will check on it post-haste. If anyone on this board knows about it, please help?!!?!?!? If I go with this option, I would have to set up a E-fund for the rent account to cover 6 months rent just in case of vacancy. I will probably have to put off the snowball until I get that amount in an ING account or something. I will also have to hire a manager for a percentage of the monthly rent (I have six houses in TX that are run that way) The six houses in TX are trailer houses in the clear, but making nothing because of their age and the repair costs and the area they are in. FYI, are nowhere close to Ft. Hood. If I do this, I will be earning equity on the house until I get back to Ft. Carson or until I decide to sell it after I pay off the 2nd Mort. I also see it as potentially a source of income after the mort. is paid off.I am leaning towards the latter because it is the only one that looks like it would work. Does anybody else have any ideas. Thanks for the time and patience.Eric
The principle on the first mortgage is what the house is worth (I just got it a year and a half ago) which is around $190,000. Stupid question: How did you get a second mortgage if your first mortage was for the full equity of the house? I think you do have a major problem here, and renting for income is probably not going to be a solution. Does the military have any services that assist members with relocations? If so, I would check with them. I would also talk to your agent who put you into the home. If they do a lot of work with military personel, then they might be experienced in handling this kind of thing.FuskieWho welcomes you in advance back to the US of A...
Stupid question: How did you get a second mortgage if your first mortage was for the full equity of the house?****************************Believe it or not, there are a number of lenders that offer seconds for up to 125% CLTV.
You can rent out a house purchased under the VA program, but you won't be able to use your VA guarantee again until you have paid off the original home. In other words, you can only get the VA guarantee on one house at any time.Do you have any equity in the original mortgage? We rolled the 3% VA financing fee into our mortgage, and it took 2-1/2 years to pay down the principal on that fee before we even saw a penny of equity in the home. If you didn't put any money down, you may have more negative equity than you realize.Have you had the house appraised since you bought it? From what I hear prices at Carson/ Co. Springs have shot up. You might have more equity than you think.Depending on the area, condition of the house, and waiting list for military housing, you could do quite well in the rental market. From what you say about the negative equity, this may be your only option. I can't think of any other option for $42,000 of unsecured debt.What are your housing plans at Hood? Your BAH will decrease (but only about $60 at the E-4 level). Can you float the mortgage for a few months if the house doesn't rent or sell? Not trying to give you more to worry about, just bringing up some other factors.mm
This one might be a good question to post on the Buying Selling Home board.....
One other thought - is there someone who specializes in managing properties for military personnel and renting them to other military personnel? If you are rotating out, then there is a good chance someone is rotating in who might be interested in renting your place. Again, check with your agent or someone who has experience with this type of real estate situation.FuskieWho thinks unless the base is closing, there should be a steady flow of potential renters...
Eric,You might want to ask this on the Military Fools board. They may know something about VA financing.http://boards.fool.com/Messages.asp?bid=112957Thank you for your service, and stay safe.foolazis
Fuskie, I found a place that was able to finance a 2nd mort. for 125% of the value of the house. I knew it was a stupid thing to do at the time, but I had no other options to make ends meet. It will work if I can pull some strings and stay at Colorado. Renting for income is a distant thought right now. I am just trying to hold off selling the house until there is more equity in the loan. I have several houses in TX that are paid for that I can probably get a loan for to cover the 2nd mort. if I decide to sell the house. The VA loan laws state that I can rent the house after paying on the loan for a year. I cannot, however, apply for another one if I find a house I would like to purchase in TX. That doesn't mean I can't buy a house with another loan-just doesn't have the VA Loan Guarantee on it. I haven't had the house appraised for awhile and last time I did have it appraised, there weren't any houses near it. Now there are houses everwhere. I also did some work to the house to raise the value. I will have it appraised upon returning to check that possibility as well.
Mastiffmama, As of right now, the mortgage is at $188,000. The house was originally bought brand new worth $187,000. I know for a fact that the value has went up since I had the house appraised. If I go with selling the house, the only problem I will encounter is having to come up with all the fees and stuff for the agent and whatever else needs to happen to sell the house. The second mortgage isn't even a problem now. I found a way I can get loan using my other houses as collateral. I won't default the loan, so I won't lose anything. Being in the military, I will set up an allotment so I won't ever miss a payment on the loan as well. As far as renting the house, I will be able to float the mortgage for like maybe a month or so. I have enough in my personal e-fund for three months, but that is the entire account balance. I will be setting up an efund of six months for the mortgage if I so rent it, though.Thanks for the input and with any luck, I will get though this without a scratch.Apachemech
I found a place that was able to finance a 2nd mort. for 125% of the value of the house.I hope you realize that the portion of the interest paid on the amount of the loan above the market value of the house is not deductible? I think a lot of folks seem to miss that part when taking out these 125% loans.foolazis