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If the debt on my house is substantially higher than what I could sell it for, would I be better off foreclosing it?

Asked over 2 years ago - Seattle, WA

I purchased the house a couple years ago for 290K and got a line of credit when house prices were high to 400K. I maxed out the line of credit and used the money to invest in development firms 110K, now the firms are filing for bankruptcy so I am now left with this massive mortgage. I can barely afford the interest only loan but will be getting married and will not be able to afford anymore. Was thinking of foreclosing the property and then purchasing a more affordable property but worried the foreclosure will keep me from purchasing another place (current credit score is 750).

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Attorney answers (1)

David A. Leen

Reputation Level 10

Answered over 2 years ago. Real Estate Attorney in Seattle, WA.

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A foreclosure would probably make it very difficult to purchase another house for at least two years after a foreclosure. A foreclosure on the first lien would also leave you still liable for the line of credit. It is possible to strip off second lien's in a Ch. 13 bankruptcy if the value of the house is below or at the amount of debt on the first lien. This is a complicated legal proceeding and you would need to have an attorney evaluate your situation. If you like the house and would live there for some time this might work. If you plan to live elsewhere after you get married, your spouse may be able to qualify for a purchase loan. Marry into wealth, if you can!

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