Worst case scenario for personal finance. Do you have a plan?

[TNDemo]

My husband's company is getting really slow and we are worried about what may happen in the coming year. He is the bulk of the income in the household so it would be a huge hit. Anyway, if the worst happens and no other job can be found, we are trying to decide what the best course of action would be. We have about 2/3 equity in our house (we thought putting down 50% on a house four years ago was responsible but now I wish we had kept the old one and paid it off but I digress) and the mortgage is our only debt. I saw a news clip the other day about a woman who had worked restoring foreclosed homes for resale and has lost her job and is now facing foreclosure herself. She said she would not run up her credit cards or draw out of her savings but would just walk and let them have the house. I can see doing that if you had little equity but I am not willing to forego all the equity we have. We have a large equity line that is at zero but unfortunately it is with our first mortgage holder. I have heard you should contact your mortgage company to see if they will renegotiate if you have trouble but I have a feeling if I told them we were having problems they would freeze that equity line in a New York minute. We would probably put the house on the market but there is nothing to say it's going to sell.

So - do you have a plan if the worst comes? I know some of you are living it now. What is the best thing to do if you have a good bit of equity in your house but can no longer afford it?

[Midlodemocrat]

1. Do you have an equity line, or equity loan?

If you have a line, you should be fine. You can draw on it as needed. If it's a loan and you currently can't make the payments you should probably contact the mortgage holder.

[TNDemo]

6. It's a line.

nm

[Warren Stupidity]

2. Pile in the cars and head for someplace warm.

Leave a note for the bank re: house. Camping gear etc. most useful.

[progressive_realist]

3. I'm reviewing the Mad Max movies for helpful tips.

Apparently guns and motorcycle leathers are necessities.

[htuttle]

8. Don't forget the feathered shoulder pads!

They add that crucial neo-barbarian touch that virtually screams 'post apocalyptic'.

[leftstreet]

4. I'll be petitioning Congress for a bailout n/t

[bemildred]

5. I plan to starve. What do you plan?

We are all in this together. Illusions of making it on your own are just that.

[bertman]

15. Okay, bemildred, that's Plan "A". What's Plan "B"? I don't like the starve part of Plan "A".

[summer borealis]

7. Live like kings on credit cards

Max out the fun, then pull trigger.

[patriotvoice]

9. Farm, guns, and ammo. Check, check, and check. I welcome all who will...

eat only to ease the hunger, and no more.
work hard to grow their own food, and kill their own game.
respect the differences of others around them, and embrace their similarities.
protect the community order, even if it means death.

[GoesTo11]

10. A serious suggestion.

I'm not sure this is a great idea, but it might work. I'll work some numbers not knowing what your house is actually worth. If you could have a line for 1/3 the value of the house (since you have 2/3 equity), then before your husband actually loses his job, take out the line. Then use it to make mortgage payments until you've got steady income again. If the house is worth 240,000, and you owe 80,000 on it at 6%, for 400/mo payments, you take out this cash and have another 400/mo payments to cover the line, but it's 80,000 which will cover 100 months of payments - over 8 years - for both the original loan and the line. Not great, but better than walking away now. Having the flexibility could make a big difference.

The key would be doing it in a way where you make sure they can't recall the loan (or the line) unilaterally if, for example, you miss a credit card payment.

[TNDemo]

12. Thank you.

I am just trying to think this thing through and wondering what the best route is. Would their ability to call the loan in be written in the loan agreement or do the terms change from time to time?

[GoesTo11]

13. I think it would have to be written in, but read carefully.

With a loan, I'm pretty sure they can't call it. With a line of credit, I think they could certainly pull back the line of credit except for what you have already used. So if you have 80,000 HELOC, but have only actually borrowed 10,000, they could just reduce your line of credit to 10,000 so you couldn't take anymore. They can probably do it just about unilaterally based on your credit score, their bond rating or whatever. But if you've already taken out the cash, I don't think they could. Anyway, read the contract very carefully or check with someone who can before taking that route, because the worst case would be you take out the money and they demand it all back immediately at a time when you don't have it. I doubt they can do that, but again, check.

[SoCalDem]

11. We have enough equity in ours, and owe nothing but regular bills.

We have some CDs and my husband's old enough to collect SS if we had to.. he wants to wait until 70, to get the max, but in a pinch, we could manage on the lower amount.. I ahve a small pension coming, someday(not sure just when)

We would definitely rent a room or two if we had to generate extra cash..but they would have to love kitties:)

[qwlauren35]

14. Keep your house, rent out the basement or an extra bedroom.

Be very picky about the tenant, of course. But if you're truly pressed, you can make it work.

Many of us who went to college had roommates. We may have hated it, but we usually were able to make it work. I have done it many times throughout my life, and it has usually worked out.

I would strongly recommend a non-American tenant, as people from other cultures are often MUCH MORE flexible about living together. A graduate student may also be a safe bet.

[Lisa0825]

16. My job is ending January 17th.

I have had about 2.5 months notice, and have been squirreling away as much as I can. I had a decent savings until I paid $2500 to replace the plumbing in my attic and walls. Thankfully I have worked to become almost debt free over the past few years. I only have my house and car and some small balances on a few cards I got just to improve my credit. My house has lost too much value, so I can't use equity to help. As it is now, between my savings and unemployment pay, I should be able to survive without losing the house and car for about 6-9 months. I hope that I will find a new job way before that. But if the worst happens, I do have a (very) cat friendly DUer friend who is willing to take me and my foster brood in. So, while no one wants to lose a house, my worst case scenario would be something I can survive.