If I have to default on a investment home can they come after the equity on the home I live in?

Question

Don't get me wrong I don't want to default, I'm just trying to find out what my options are. I've been holding on but I don't know how long I can it depends on the interest rate & the people I have in it. I just need to know what the law says.

Answer 1

I don't think they can come after your primary home. But they can put a lien on your credit report. In that case if you ever sell your house and want to buy a new one that lien will affect the title of the new property, so you would end up paying if you ever want a new house someday.

Answer 2

it depends on how you structured your rental business. if you Incorporated the rental or put it in an LLC then no they cannot come after your personal equity.  if you didn't use any sort of business corporate structure then yes they can come after your personal assets to pay the debt.

Answer 3

You have a mortgage, which is an IOU secured by the property.  If you default, they can get a deficiency judgment and come after you for satisfaction of debt owed.  That's why there are short sales--require lender agreement, and Deed in Lieu of Foreclosure--require lender agreement.  Generally with those two options, your debt is wiped out and they won't come after you for the deficiency--but make sure those are the terms.

Answer 4

The can and will come after any real property you own if you foreclose.  If you are in a recourse state (most are) the lender will foreclose, obtain a deficiency judgment and place a lien on any real property you own.

Posters that tell you lenders are too busy or don't take this course of action are wrong.  Lenders are trying to plug the holes of their losses, and this is one method they are employing to stop losses.

You may be able to short sale or do a deed in lieu of foreclosure that will allow forgiveness of the loss, but make sure the agreement stipulates that.

Answer 5

There is currently temporary debt forgiveness act, so you do not have to pay income tax on forgiven debt, if your "primary residence" is foreclosed and any debt is forgiven.

But that does not apply to other property.  So if your investment property is foreclosed or sold in a short sale, you may still owe any deficiency (or income tax on the deficiency if it does go away).