What happens if you can't make mortgage payments?

[nym9]

What is the name of your state? - NEVADA

I need advice on how much of a down payment to put down when buying a new house. In a worst case scenario, what happens if I put down more than 50% but then in an "unforeseen emergency" I am unable to make any mortgage payments: Exactly what happens at this point and how long does it take? Is selling my only option to recover my downpayment?

[Some Random Guy]

If you don't make payments then the mortgage company takes your house. Your percent equity doesn't matter. Its the fact that you aren't paying the agreed upon monthly payments. Therefore, reduce your down payment slightly OR get a home equity line of credit (HELOC) (which you can use to get money to pay yout mortgage. But, make sure you get the HELOC before losing your job or becoming disabled, otherwise your rates or eligibility may change.

[sti4658]

Here's personal experience:

We suffered those "unforseen" emergencies in MT. We sold our home and put every penny into a sales & security agreement protected by a trust indenture 8 years ago. We bought a c-store, 2 homes, mobile home park and RV park. After paying 125K + in cash to the Heir of the estate, our Christmas present 04 was a "Amended notice of Trustee's Sale". It specified our defaults as "not paid as agreed" (no 30 day written notice listing any default or what was necessary to cure), it stated the change of trustee and the sale date in 120 days-- all on this one notice. Merry Christmas. That sale date was Monday where it sold and then unsold. That night the "heir" who had ordered the sale threatened my son (tenant in trailer) and gave him a 3 day verbal eviction notice, took the keys to the store and starting taking things. So much for contracts, 10 day right of possession or anything else.... We learned the hard way that we had been deceived into becoming a 8 year slave without rights. Since you live in Nevada, discover before you buy, what your rights in reality will be and gamble what you are willing to lose. When she, the heir, accelerated the note due knowing that we didn't have 70K without any communication whatsoever except the "amended N of Trust Sale", we lost it all or so it would appear. No money, no lawyer, no rights...... We left with most of our children and for that we are grateful. Now, we're trying to get the other relocated. God willing we can do that smoothly in time.

[nym9]

Originally Posted by Some Random Guy

If you don't make payments then the mortgage company takes your house. Your percent equity doesn't matter. Its the fact that you aren't paying the agreed upon monthly payments. Therefore, reduce your down payment slightly OR get a home equity line of credit (HELOC) (which you can use to get money to pay yout mortgage. But, make sure you get the HELOC before losing your job or becoming disabled, otherwise your rates or eligibility may change.

Thanks for the info. So I take it declaring bankruptcy is not an option with a mortgage lender?

What if you get a line of credit to pay off the mortage as you suggested, is declaring bankruptcy to THAT lender an option?

[efflandt]

If you can help it, you should not "rely" on bankruptcy. If you have 50% for down payment, put a portion of that in an emergency fund instead (laddered or staggered CDs, preferably ROTH IRA when possible). So if you lose your job or get into a bind, the CDs (even if some are long term) will mature frequently enough that you will have the money.

I just converted my mortgage into a 20 yr fixed rate HELOC (to reduce interest and length). But I can borrow against my original amount at any time for (prime - 0.5%) variable rate (or credit card teaser rate checks).

Regardless of how you finance your home, you would be better off selling it before reaching a point of foreclosure. For my HELOC it says "Waiver of Homestead. Borrower hereby waives all right to homestead exemption in the Property."