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Should I Foreclose on my home?

I owe $180,000 on it, and can’t afford to make the monthly payments of $1100 due to a chance in circumstances (2 x interest only mortgages 6.5% fixed ($140,000), and a variable, currently at 4.725% ($40,000)). It’s been on the market for almost 3 years, and is currently listed at $169,900, so including real estate agent fees, I’m losing ~$20,000 when it sells. Unfortunately, this money will be coming from my 401k plan, which becomes a ~$365 per month payment to pay back. My plan is to rent an apartment if it ever sells, with rent being anything from $650 to $900 based on what I’ve seen going on craigslist. Unless I end up with the low end of those rent options, my overall financial situation may not change significantly from how it is now, due to that 401k loan to pay each month. However, there are other compelling reasons to get rid of it besides financial ones. Namely, that it is an hour from where my life actually is (girlfriend, job, etc), I don’t have time for the maintenance of it, and it’s generally causing copious levels of stress in my life. I have no interest in renting the house. Properties in that area are not renting for anything close to my monthly mortgage payment and I don’t have the time to deal with that, nor do I want that added stress. I have no other debt, and decent credit (650ish I think). I understand that for seven years, foreclosure will negatively impact my credit, my ability to get a car loan, another mortgage, possibly renting an apartment, etc, but I think I can live with that - I don’t even know that I will need anything involving credit besides the renting. So in short, my three most compelling reasons for my interest in foreclosure, is I can’t afford to live with the expense of this house, I’d really like to avoid the burden of a ~$365 per month payment, and it is causing unmanageable amounts of stress in my life. Should I foreclose? Thoughts? In response to sbinlb, I was saying in my original post that selling my house would NOT put me in a better financial situation because of the 401k loan, and as David Z pointed out, my house will not sell for the list price, so that 401k loan could be more than $500 which would be an even worse financial situation than I'm in now. I'm not walking away from my house because of stress. I'm ready to walk away from it because I can't afford it because of a divorce and having to pay a lot of child support. I have done everything else I can do. I cannot reduce my montlhly expenses any further. I have absolutely no debt besides this house. What other options do I have? That's what causes the stress!

Asked By: FBK - 11/9/2009
Best Answer - Chosen by Asker
Your house is in a negative equity position - it's no longer an asset and won't be for 2-3 years... More
Answered By: iwantzev - 11/10/2009
Additional Answers (3)
yes allow the lender to foreclose this will be a nice way to pick up about $40,000 in forgiven debt. save your mortgage payments for a few months to build up a nice little savings balance. Your home will sell for well below $169,000.
Answered By: David Z - 11/9/2009
 
Well, first off, you don't foreclose on your home, your bank does. You just let it go into foreclosure. Now, I can't address all your questions, but as to selling in a down market; you should avoid doing so if you can. Historically, houses will always go up in value, but you have to think long-term, not short-term. It... More
Answered By: Partyplanner21 - 11/9/2009
 
Your story makes no sense... More
Answered By: sbinlb - 11/9/2009
 
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