Here's my situation: I purchased a new home in Phoenix in September of 2006 as a single man. House sold for $345K, with a ADJUSTABLE mortgage of $311K. One month later, I met my wife to be. In October of 2007, we were married.
The house, while nice for a single man, is not so nice for a married couple. There's simply not enough room for us. In addition, today I still owe $290K on that loan, while Zillow says my house is worth $135K.
I work from home for a company on the east coast. I've been having to make trips back to the east coast (which is a pain), so my wife and I have decided to buy a home nearer to the office. Luckily, I am eligible for a VA loan, and did NOT use it on the current home (not sure WHY I didn't use it, but for whatever reason, I didn't). I'm also luck in that I have enough income to qualify for both homes.
Since I am so upside down on my first house, and the interest rates will only continue to rise, while the value won't come back for years... we've decided to buy the house on the east coast, then walk away from the house here.
My understanding is that since AZ is a non-recourse state, and since I only have the one loan, and never took money out of the house, it should be very easy to walk away... with no fear of a 1099-C. After reading the IRS rules, it appears that we would be taxed on the difference between the amount we owe and the basis cost of the house (in our case, the original loan value). Since that equates to a loss of $20K for me right now, there will be no taxes owed.
So, we will purchase the home on the east coast using my VA benefit, and as soon as we close, stop paying on the home here in Phoenix.
I plan on passing this plan past a lawyer first, and then retain that lawyer to deal with the bank when they start contacting me for payment. My hope is that if I have a lawyer represent me, the bank will accelerate the foreclosure process.
Does anyone see anything wrong with this plan, or have any tips they would like to give me.