Saying Goodbye to Your Home: Here's How That Can Be a Good Thing.
By Tracy L. Hirsch
Your home may be keeping you from your long-term goals of financial freedom.
Many of us have bought into the idea that owning a home means that you’ve made it in life. While being a homeowner can be a great experience, it isn’t a one-size-fits-all solution for everyone’s housing needs.
We’ve all been told that home ownership is part of the American dream, but are there times when it’s not? While owning a home outright has a lot of upsides, most Americans have to take out a mortgage loan in order to afford it.
Having a monthly mortgage isn’t inherently a bad thing — in fact it can be the contrary. As with anything in life, it comes with pros and cons, but at the end of the day, you have to ask yourself whether you can truly afford to own a home.
Sometimes staying in a home seems like the “right thing to do,” but is it really the best choice if it’s weighing you down financially?
If you’re living paycheck-to-paycheck each month after paying your mortgage and all other monthly expenses, then that means that you technically can’t afford your home.
Why is that? Because owning a home is a much larger investment than just a mortgage payment.
Owning a home means that you need money for:
– home owner’s insurance
– mortgage insurance
– property tax
– utilities (electricity, heating/cooling, water, etc.)
– external home maintenance and repairs (such as roofing, gutters, siding, yard maintenance, and so on)
– internal home maintenance and repairs (such as appliances, flooring, HVAC system, plumbing, and electrical issues)
– HOA dues (if applicable)
Remember: Home ownership isn’t the best fit for everyone.
So if you can’t afford all of the things listed above, you’re currently throwing “good money after bad,” meaning, if you continue to pay your mortgage payments and can only afford to pay for the home owner’s insurance, you’re putting money into something that won’t last. How so?
At some point, if you don’t pay your property tax, HOA dues, and so on, you will have liens against your property. That’s not a good situation to be in.
You might be thinking, “Well, even if I can’t afford those things, what else can I do? I need a place to live!” That’s a great question. What are the alternatives? You definitely need a place to lay your head at night, and this is where it’s time to think outside of the box.
Here are three of the easiest options if you can’t afford the cost of home ownership or you’re behind on your mortgage:
1.) File a Chapter 13 bankruptcy to save your home. If you’re behind on your mortgage payments, and need to catch up on the arrearages (i.e. the total amount that you’re behind on your mortgage), you could file a Chapter 13 bankruptcy,
This will do two things: first, it will protect your home from going into foreclosure, and second, it will set up a repayment plan where you can pay back your arrearages over a five-year period.
This will only work if you can still afford to pay your regular monthly mortgage payment (and all home-related expenses) in addition to a monthly Chapter 13 payment. It’s best to speak to an experienced bankruptcy attorney to look at your budget and determine whether or not that’s feasible.
If it’s not feasible for you, it can be beneficial to let go of the house, and go with options 2 or 3 (those are listed below).
If you’re already in a Chapter 13 bankruptcy and need to let go of your home, you could convert your case to a Chapter 7, and also choose options 2 or 3 (see below) while you save up for a future home that you can afford.
Within 24 months of filing a Chapter 7, you could rebuild your credit to qualify for a home once you’re in a financially stable place.
Again, it’s best to speak to a qualified attorney in order to discuss the best plan of action for your situation.
2.) Merge households. Multi-generational households were very common in the 1940’s, mostly due to the ‘Great Recession of 1937,’ where the economy took a sharp downturn after The Great Depression.
While the percentage of families who lived together decreased slightly in the subsequent decades, it started to rise again in the 1990’s, and has steadily increased to the point where the numbers are currently at an all-time high.
Many people think of merging households as negative, however, a sibling moving in with another sibling, or kids and grandkids moving in with the grandparents, can have multiple benefits. It can save tons of money if multiple adults contribute to one mortgage payment.
Also, splitting the cost of utilities and maintenance saves thousands of dollars too.
Additionally, studies have shown that healthy individuals who live with family members (especially two-generation households) have a longer lifespan than healthy individuals who live alone. Having a support system around you every day can provide greater emotional well-being, and so can having affordable living expenses.
If you feel overwhelmed by the thought of packing all of your belongings and moving, you might be tempted to keep paying on a house that you can’t afford in order to avoid the stress. However, if you pay someone to pack up your home for you, that can solve your problem.
Even if you have to pay $3,000 for someone to help you pack and move, that’s better than paying that same amount every single month for a mortgage, utilities, insurance, and more.
3.) Rent an apartment or condo. It’s important to remember that your value as a person isn’t defined by how much money you have or by what you own. Renting is a perfectly acceptable way to secure housing for you and your family.
Renting an apartment or condo usually means that you don’t have to personally take care of outdoor maintenance (such as grass-cutting, roof repairs, etc.), and you don’t need to replace appliances or pay property taxes.
All in all, merging households (friends living with friends, or families moving in together) and renting are two wise alternatives for home owners who are in over their heads financially.
If your heart is set on becoming a home owner, renting or moving in with family can give you time to rebuild your credit and save money for a down payment.
If you’ve recently received a foreclosure notice, and want to save your home with a Chapter 13, or if you’re currently in a Chapter 13 bankruptcy and can no longer afford your home, let’s chat.
I offer free consultations to discuss your debt relief options, and we can talk over the phone or in person. Text or call (502) 435-2593 to find out if your home is worth keeping, or if you’re better off exploring other options. I’m always here to help!
Tracy L. Hirsch
Louisville Bankruptcy Lawyer
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