Sukotto. Unfortunately, no, I didn't publish the financial calculations that we made. But I can walk you through the basics of the analysis. We modeled out a few different scenarios:
- Real estate appreciation at 1%, 3%, 5% compounded.
- Whether we stayed with them as primary residences, or convert to rentals. Assumed that rental rates are mostly flat.
- In primary residences, we accounted for tax deductions from mortgage interest.
- We then made assumptions about the debt cancelled by taking the fair market value of our homes, minus the debt we owed, plus another 10K for unknown selling costs we would incur.
- We then estimated some sort of "cost" that we would both incur for having low credit for up to 7 years.
We then modeled all this out, and took a look at our net worth in 10 years on the assumption that we sold our homes at that time. We assume a 7% transaction fee for selling the homes.
In both of our cases, we came out ahead in all scenarios by pursuing a foreclosure. We figured out that we needed our houses to appreciate at 11% annually for 10 years in order for holding onto the home to be more profitable.
One last note, neither of us have large families, so we don't have the history, memories, fondness, and attachment to the homes that would have made this choice much harder. Fondness is something that can't be reasoned in spreadsheets.
We then modeled all this out, and took a look at our net worth in 10 years on the assumption that we sold our homes at that time. We assume a 7% transaction fee for selling the homes.
In both of our cases, we came out ahead in all scenarios by pursuing a foreclosure. We figured out that we needed our houses to appreciate at 11% annually for 10 years in order for holding onto the home to be more profitable.
One last note, neither of us have large families, so we don't have the history, memories, fondness, and attachment to the homes that would have made this choice much harder. Fondness is something that can't be reasoned in spreadsheets.