I have no first mortgage. It was paid off. I do have a home equity loan that I owe $320,000 on. I do not have to make principle payments on the loan for many years . The interest rate is 2.25% variable. (about $620 per month). My line of credit is $333,000. My home is in great disrepair and is nowhere near being worth the amount I owe so selling is not an option. Soon I will not be able to pay the interest as the loan interest is added to the balance each month. What happens if I chose to give the house over to the bank? Can they sue me for the money still owed? (Home previously was valued around $475 to $525).
You wrote, "Home previously was valued around $475 to $525," which does not mean it is worth that much today, especially if, as you wrote, the home is a victim of deferred maintenance. This answer assumes that the market value of your property is at or below the balance of the equity loan.
Unfortunately, you do not mention what state you are in, so you must consult with an attorney in your state to determine if your home equity loan is subject to any anti-deficiency statute, and whether the bank can sue you for the difference of the sale price and what is owed. Every state handles this differently.
I have answered questions from other readers regarding the issues you raised in your message. See the following six Ask Bills resources to learn more:
Call your mortgage servicer, which is probably a bank, and discuss your payment options. Given that you are already in an interest-only loan at rock-bottom rate I doubt the bank has any program to help you, but you can try. You may be able to make payment arrangements until your situation improves.
Review the above sites to attain valuable information about the consequences of foreclosure and bankruptcy, and how you may be able to avoid them with the Home Affordable Mortgage Program. If you become delinquent in your payments, the bank can foreclose upon the property. Hopefully, the bank will be willing to work with you so that you can stay in the home. As mentioned in the links above, should the bank foreclose and the property is sold for a price less than the balance of the loan, it is likely that you will be liable for that deficiency.
I hope this information helps you Find. Learn & Save.