The suggestion sounds absurd that to escape foreclosure troubles of finding a shelter one can walk out of the house while buying another. This is the answer that some people have found to their problem about finding shelter.
Jim Eble lived in his own house few weeks ago but today it is vacant because the amount he owed to the bank was more than the value of the house. This did not stop the bank from threatening foreclosure. So he walked out. The problem was that he needed to stay somewhere. The solution was simple – he planned on buying another house. This second house was coming at a bargain rate. Here lay his advantage.
The growing trend nowadays is ‘buy and bail’ – especially in the areas that have been worst hit by foreclosure.
Elbe owes his bank about $334,000 on the first house but the value of the REO house has now fallen to $219,000. The price is dropping further. His adjustable rate mortgage had doubled to about $4,000 per month – crossing the limits of his affordability. This has prompted him to act quickly before the bank forecloses by buying a new house for $285,000 after contracting a fixed rate mortgage that his income can cope with. Once settled inside the second house he can either sell off the first one for a considerable loss to the bank or walk away permanently allowing it to be swallowed by foreclosure.
This exit strategy benefits only those bank REO owners who have the money for the down payment for the second house and who can continue with two mortgages until the second house becomes their home when they move into it.
Kim Hinske also did likewise by buying a new house for $280,000 to get out of an unmanageable mortgage. Although initially scared, Kim is now happy that they have a bigger house and less monthly payments to make.
For those who can afford it, this ‘buy and bail’ is a smart alternative. There is no point to go on struggling with a mortgage payment when the REO properties has become worthless. The only negative factor is that the credit history has to be rebuilt. Foreclosures damage credit ratings for many years to come. But considering the tremendous advantages many shrug off this downside to the issue. It is a desperate situation and the people directly in the line of fire are coming up with desperate remedies.
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