Foreclosure Consequences - Am I Better Off Foreclosing??

by David
(Woodland Park, Co)

I moved to Colorado when the housing market was starting to go sour. I have a house in California that was on a 2 year interest only, then variable loan. The market was good when I secured the loan and I believed I would be able to sell the property when I moved. The property did not sell. When I moved to Colorado I took a large pay cut and eventually was unable to make my mortgage payments. I cashed in my 401k when the house was about to forclose to prevent loss of the house. I was unable to refinance after the 90 day late, and 5 months later my loan went variable. My payment went from 2200 a month up to $3600 a month within 6 months. I couldnt afford that payment so the house is again going into forclosure. My lender will not refinance the loan since I no longer live in the house. It seems that no one wants to loan on "income" properties so I guess I'll just accept forclosure. My lender said If I lived in the house perhaps they would work with me on the interest rate. My lender said they might consider a deed in leiu of forclosure, however id have to pay taxes on whatever the house sold for. Am I better off paying these taxes..which could be significant on a $360,000 sale or am I better off forclosing? If I were to forclose would I also have to pay the taxes on the sale of the house? I know that the house will not sell for what I owe on it. I owe about 359k. It might sell for 300k?