I can't continue payments on my investment property. What can I do?

I bought a property with plans to subdivide and sell. After the purchase we realized we could not subdivide. Then the housing crash happened. Now I am stuck with a HUGE mortgage payment and I can't sell the property without taking a 300k loss. I have perfect credit. I've never carried credit card debt. This housing crash has killed me though.

If I forclose will I lose the house I'm living in? (not the investment property that I owe on?

Do I need to default on payments? I just want out!

You need to contact the lender. See if they will take a deed-in-lieu of foreclosure. This will release you from the debt.

If they will not, see if they will do a short-sale.

If they will not then either sell on your own to someone and then pay back the extra $300,000 or let the bank foreclose. To foreclose you will need to default on the payments.

If the bank forecloses, there will be legal fees tacked on to the amount you owe them. Usually around $50,000. One thing to understand about the foreclosure process is that the bank will turn around and sell the property. They deduct the amount of the sale from whatever you actually owe them (mortgage plus fees). Anything that is a shortfall you will still owe to them. In some foreclosures they will forgive the debt, but since we are talking of a debt well over a quarter of a million dollars they most likely won't.

The only way they will be able to come after the house that you currently live in is if you used it to guarantee the investment property. If you did, yes they can come after it. If you did not use it to guarantee the investment mortgage then no, they cannot come after it.

Be prepared for your credit to do a complete turn around. Once the foreclosure hits your record we are talking at least 7 years before your credit will recover.

Good Luck!

first of all i would create an LLC for the property that way if you do default on payments it doesnt affect your credit and the bank cant touch your personal property. if u cant do that create an LCC that owns everything you personally own. Its not worth losing your house or your credit by holding onto the property. you can always use your mind and credit to make that money back. if the land is residental put houses on it to bring in rental income.

I'm sorry I can't answer to OP's Q but have a question to danmar. How do I set up LLC for my assets so the bank wouldn't come after those? I mean how would I appoint that my LLC owns them and not me? Would bank consider as a fraud or something? FYI, I'm in FL.

No you will not lose the house you live in currently if it is not connected to the investment property. Also you only have a few things you can do.
1. Sale it and take the loss
2. Rent it out for the price of the mortgage
3. Have some else pick up your mortgage payments and give you a few dollars.
4. Contact the bank and give it to them in leu of the debt.
5. Contact HUD they will help you also.

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