Any Folks Have a Mortgage They Were Paying When They Decided to Go Back to School?

[NervousNellie]

The eternal optimist in me wants to believe there must be help out there for folks in my circumstance.

I have an offer from a great school for full tuition but no fees, health care, etc. and no living stipend. The tuition offer is based on full-time enrollment, and even part-time enrollment will be a lot to handle because it will require four hours of commuting (two hours each way) every day I have classes...not to mention what an academically rigorous program it is supposed to be.

Thus I need to either quit my job or work on a very part-time basis. I couldn't sell my house for its loan amount right now. So I am stuck with this absurd mortgage ($1750 per month), which my mortgage agent told me it would cost more to refinance than what it is worth, and I am between a rock and a hard place trying to pay my mortgage and go to school.

There must be programs or grants for people like me, right?! Right?!

[growing19]

Oh, my. I wish I could help you with suggestions for programs, but that idea never occurred to me until you brought it up. I may do some research and let you know. Alternatively, if your family situation wouldn't prevent it, could you rent your home and move closer to campus? I'm looking at both options (selling and renting) for my condo.

[growing19]

P.S. Congratulations on your acceptance into a fantastic program!

[geodrake]

My hubby and I moved from one of the areas hardest hit by the housing market decline to attend Grad School, and have been renting our place out. The rent doesn't cover the whole mortgage (forget about the HOA fees) and went unrented for 4 months. Thankfully someone's back in there now. Even though we both TA, we're having to take out student loans (especially when the place wasn't rented out). All this after leaving a 6-figure job. But, it's better to do what you love then hate going to work so....

Renting is always an option. Hopefully you didn't buy at the top of the market as we did, and should be able to cover your mortgage amount. One thing to consider though is renter's rights. Where we live now, I've been told that the renter has more rights than the owner, so it's something to look in to

-Anna

Edited March 17, 2010 by geodrake

[NervousNellie]

Thanks for these kind and helpful responses. We didn't buy at the very top of the market, but not at the bottom either. My realtor put me in touch with someone from the rental division of her office. She said that she thought we could list the house for up to $50 over our monthly payment, but that it would really be the very maximum we would likely get for the house, and that we may even have to take a bit less. We'd also have to pay water and sewage, according to state law, though we probably wouldn't need to offer other utilities (thank goodness...saving on utility costs would be one advantage to moving).

The complication with renting out our house, both in terms of liability and insurance, as well as protecting our investment through good care, is that we have a pool. Apparently, that complicates matters a great deal, and our insurance company might even put restrictions on renting the house that could be prohibitive.

[dumbmatter]

I couldn't sell my house for its loan amount right now.

If your house is worth significantly less than your debt on it, why not consider just walking away?

[captiv8ed]

That is a tough one. I haven't heard of any programs to help.

We owned a house a few years back and thought about renting it out but it was too scary, with the notion that we were already on the edge financially, and if something went wrong with the house or it sat vacant or if the tenants just stopped paying, we would lose our shirts.

PMing you more info!

[NervousNellie]

That is a tough one. I haven't heard of any programs to help.

We owned a house a few years back and thought about renting it out but it was too scary, with the notion that we were already on the edge financially, and if something went wrong with the house or it sat vacant or if the tenants just stopped paying, we would lose our shirts.

PMing you more info!

Thanks for the PM. It is good to hear from you and I will have to look at your recent posts for updates. I appreciate your balanced, cautious look at renting out houses. Indeed, its a big deal...and our pool in particular is a liability.

[NervousNellie]

Thanks for the PM. It is good to hear from you and I will have to look at your recent posts for updates. I appreciate your balanced, cautious look at renting out houses. Indeed, its a big deal...and our pool in particular is a liability.

Oh wait! Just saw your updates on your siggie...congrats on IOWA!

[Aymee]

I work preparing taxes in a military town. Because of the housing market there are a lot of military people out there right now that have found themselves unexpected landlords--Uncle Sam says "move" you don't say no! If you have any need-based aid, owning a rental can be very good for making your AGI (adjusted gross income) be lower. That's because on your taxes you get to claim depreciation on the home. This means you can be earning money--collecting more in rent than you pay on the mortgage and maintenance--and still be "losing" money according to your 1040.

As to the pool... this is a question based on total ignorance, but... could you just cover up all the filters and such and fill it with dirt? Or in some other way temporarily drain it / cover it etc?

And yeah, as previous poster said... if you're upside down, consider just walking away. (But consult with tax professional first or you may end up paying taxes on the amount due--or in some states even have to pay the difference anyway.)

[Aymee]

And yeah, as previous poster said... if you're upside down, consider just walking away. (But consult with tax professional first or you may end up paying taxes on the amount due--or in some states even have to pay the difference anyway.)

I should clarify. What I meant is if you owe $300k and the bank sells the house for $200k, you could wind up with a 1099-C, cancellation of debt, for $100k that you might have to pay taxes on. Although if you could prove you're insolvent (net worth $0) probably not. But that's why you should talk to someone about it first.

[airtyme]

I am in the same situation, grad school offers but upside down in my house. However, if you walk away, won't that ruin your credit and subsequently all chances of getting a student loan?

[Postbib Yeshuist]

I actually am prepared to turn down a PhD offer (with an almost identical financial package) because it would require moving and either selling our house of paying a mortgage + rent, and that's with only a $550/mo payment and 30% equity. An education is important, but it's not worth financial ruin to do it...

On the other hand, I kind of don't agree that you would need to work part-time to succeed. You might get a full time job in your new location and go to school part-time. It could affect your financial aid, but I just finished an advanced master's on only 70% tuition assistance while I taught high school full time, coached, had a baby boy and was the sole source of income for our family. It was tiring, but I pulled it off. I think you could too, so that might be something to consider.

Edited March 24, 2010 by Postbib Yeshuist

[alexis]

I should clarify. What I meant is if you owe $300k and the bank sells the house for $200k, you could wind up with a 1099-C, cancellation of debt, for $100k that you might have to pay taxes on. Although if you could prove you're insolvent (net worth $0) probably not. But that's why you should talk to someone about it first.

Actually I'm fairly certain that right now, the law is set up so you won't owe income taxes on a short sale if it's your primary residence.

[rising_star]

I am in the same situation, grad school offers but upside down in my house. However, if you walk away, won't that ruin your credit and subsequently all chances of getting a student loan?

Probably not since you'd be getting Federal loans. I imagine the student loan changes that are part of the Healthcare Reform Bill will mean that you'd be able to get loans even if you walk away from your house. Getting private student loans might be more difficult though.

[Aymee]

Actually I'm fairly certain that right now, the law is set up so you won't owe income taxes on a short sale if it's your primary residence.

It depends on the state. Alaska, Arizona, Calfornia, Iowa, Minnesota, Montana, North Carolina, North Dakota, Oregon, Washington, and Wisconsin are non-recourse ( http://www.tnr.com/blog/the-stash/when-banks-cant-go-after-defaulters ) Although I seem to recall some fine print about California and refinancing, and I thought some states limited non-recourse loans to primary residence, although this article doesn't mention that, so definitely check with someone about your individual state.

The reason the average upside-down homeowner doesn't have to pay taxes on it is that you don't have to "when your total debts are more than the fair market value of your total assets" (but get a good tax preparer). This is not the same thing, and you don't necessarily have to file bankruptcy.:

http://www.irs.gov/newsroom/article/0,,id=174034,00.html

(Don't know why I can't get above link to work, but copy & paste and I think it will work.)

As to your credit rating, I couldn't really speak to that, but it's a good question.

Edited March 25, 2010 by Aymee