Question: What should i do with my home mortgage situation?

(Posted by: Charlie on 2010-01-19 10:44:01)

I have a home that I couldn't sell in the past summer. I ended up renting it to someone. Even though I'm getting rent from them, I still have to cough up another $600 to make up the mortgage which is an INT ONLY mortgage. So let's call this home "Home#1 ". I had to move to another state because of my job. So I'm renting this house right now for $1200/ mth which we'll refer to home#2. Now I could buy another home which WILL be less than home#2's rent. Or I could refinance home#1 to a 30yr Fixed with lower interest rate. Here the catch, since home#1 is now a rental property, i must have 40 % to put down which I don't have ($95k). The big ? here is....what should I do? Should I just go ahead and purchase home#2 first (which will be a 30yr fixed)? That way I could build equity in home#2 while I figure out what to do with home#1. Or should I just keep renting home#2 and save $95K (which will take a long time)? Please help. If there is another option out there, please help. If I'm not clear, I can clarify more. Thanks

Posted by: golferwhoworks on 2010-01-19, 10:49:23

Buy home 2 and continue to rent home 1 until the market comes back and you can sell.

Posted by: Jim L on 2010-01-19, 10:50:22

Man, this whole real estate market has created a lot of problems similar to yours. I hate to bring this up, but there may be another fly in the ointment on your plan. When you apply for a mortgage on house #2, they will find your mortgage on house#1. That payment (the whole thing, not just the $600 you are paying out of pocket) will be counted against your income when they are figuring your mortgage/ income ratio. Hopefully you have enough income to pay both and still have an acceptable ratio.