I have a friend who has excellent credit, and alot of equity in her home, but she cannot afford her monthly payments, even with a neg arm loan which right now is eating up her equity. She has to do something soon or she will have eaten up too much equity to sell and will probably have to foreclose.
She wants to stay in her home - are there any creative ways, leveraging her good credit and equity, to increase her cash flow? Maybe if she were a credit partner with another investor perhaps?
If she already has a neg am loan, there are really minimal ways to improve her cash flow any further. I suppose she could get a home equity line of credit and go 95% loan to value, but she is already flirting with disaster with a neg am loan during a period when many markets have falling prices. There are many foreclosure rescue operations, but they will want a piece of the equity, and the terms may not be much better than a neg am loan from a cash flow standpoint. She should also be wary of predatory practices in that business.
She might think about becoming a landlord. She could rent existing rooms out, or do a garage conversion, then rent the garage out. I've seen people do that.
This really depends upon the house and the market, but I have dramatically improved my own cash flow. Here's how I did it: I put the house up for rent, I didn't move until the tenant was just a few days away from moving in, then I moved into an apartment. My cash flow from the house minus my rent from the aparment was a much lower expenditure than my mortgage on the house.
I think she just needs to face facts that she screwed up and overbought, time to put a for sale sign up in the yard. Time for a downgrade. She WANTS to keep the house, she NEEDS a roof over her head. Time to sell it and downgrade since keeping is a want not a need. If she downgrades she still has a roof over her head, if the bank takes it she doesn’t…she wouldn’t fulfil the want or the need in that case. She has equity in this house, time to sell and recoup that equity, if the bank takes it that money is gone. Also you say she has excellent credit, she better act fast or she can kiss that high score goodbye. Dwelling on it and hoping a miracle will save her house isn’t going to fix the problem.