Foreclosure on rental property or go into unsecured debt?

nate_cro

Hello,

I'm new on this forum but I'm looking for some advice. We have a very small rental property that we have been trying to sell for almost 3 years now. It's too small for most people (900 square feet or so), so many people are not interested in buying. We are having trouble keeping tenants renting for a long period of time due to the area of town and the size of the house.

It is a FHA mortgage and the bank is calling saying we need to refinance in order to rent it out (it was originally bought as a primary residence, but got too small for my family). The refinance is the main reason we want to to sell the place, along with having to cover two mortgages if we can't find tenants. We currently moved and have a mortgage on our main residence house now.

My question is this. Should I let it go into foreclosure and wash my hands of the situation or try to max out a few unsecured loans to pay off the mortgage and hope to keep renting it out? I want to let it go into foreclosure since we won't need any credit for 10 years or so. I'm worried about the consequences of this though. The mortgage balance is $45k and the house is worth $50k but like I said, we can't find buyers.

A couple of reasons I think foreclosure wouldn't be a horrible thing in this situation is that the mortgage is only in my name, so my wife's credit wouldn't be effected. The balance isn't huge so a bank might not want to fight it too much to try and get their money back. And it's a FHA loan so it should mostly be covered by FHA insurance which would also be a plus for this situation.

Thanks for your imput.

Alt

This is a UK forum. You need to find a US site to ask this question.


Alt

Tim_Bisley

http://www.reddit.com/r/personalfinance might be a good place to post