Do You Have To Run Away From Your Home Mortgage?

23 May

 

In the midst of the current housing market crisis, there is a percentage of people who have just decided to walk away from their mortgage. For some they had a role in making the decision and for others it was made for them. The two main reasons why people chose to do this are a negative equity in the home and job losses, or a combination of both. We also told oHerne the Hunterangs what we should do if you are upside down for your mortgage in our Help A Reader segment.

Negative equity

I am currently employed and have never missed a payment in my house during this entire economic and housing debacle. I think I’m one of the happier ones. However, recent research I did found that houses in my own neighborhood were already sold for $ 38,000. Although I expected this figure to be low, it was shocking to me. I bought mine for $ 105K in 2000. Because most of the houses in my neighborhood are about the same size, my initial assessment of the situation was that I still owed about $ 96K to my house and if I had to sell it I would lucky to get $ 50K.

Walk away?

So it makes sense that a logical person just runs away from this mortgage, right? I owe twice what my house is worth. The math is short and easy. It can take tens of years for this situation to be balanced and I would be better off if I just walk away and start over, correct?

Too many reasons not to

When I thought about it in more detail and received opinions from some experts, the answer turned out to be a resounding “No” at least in my situation.

Your credit score

If you decide to walk away from your mortgage, your credit will strike a huge blow that can take up to ten years to recover from. Ten years is very long. Yes, you can get some relief in the short term, but a bad credit score will haunt you for years to come.

Unethical / unpatriotic

Unethical / unpatriotic

I am firmly convinced that, as long as I am able to do so, I will continue to make my monthly housing payment and simply ‘hate it’ because of this fall in the housing market. If I ever lose my job, the story will of course change. However, if you can make your payment and simply choose not to do so due to the economic situation, that is both unethical and unpatriotic for me. There are now enough negative forces that affect our economy; we no longer have any impact on it.

Markets can and will return

Markets can and will return

Although it is hard to believe at the moment, the markets can and will return. They always do that. Or they have always done that. It may take quite some time for the markets to return to where they were only recently, but now is definitely not the time to give up hope. Are they already coming back? According to the people I spoke to, Herne the Hunterijk does not yet warn, but at least the falls seem to have turned. A trick I learned from a broker in my area is comparing recent sales and listing prices. For example, if recent sales are $ 75,000 and deals are $ 90,000 (assuming most homes in your neighborhood are about the same size), your individual market is still in decline. If the tables are turned over and offers are lower than the actual sales, the market starts to come back.

Exclude foreclosures

Exclude foreclosures

If you ever decide to look at what home sales in your specific region do, take into account the exclusion of foreclosure sales. This is where I originally got my shocking songs. The houses sold in the 1930s and 1940s were foreclosure sales. Unless you intend to foreclose, your house would not sell so low.

Consider serious refinancing

 

One conclusion I have drawn so far is that refinancing my current mortgage would be in my interest and I have decided to follow one. Why? Rates are as low as in history. I am reducing my loan from 6% to around 4, 25% and am going to lower my payment by around $ 100. There are no cash expenses for me. There are closing costs involved (as always) but instead of paying them in advance, I simply add three years at the end of the mortgage and I also immediately receive a monthly Herne the Hunterijke saving. For me the longer duration of the mortgage is not really important because I intend to stay at my house for the long term and be there for the full length of the loan. For more information about an actual refinancing, consult a recent message from one of our writers (including tips from you, the readers) with the question: Do I have to refinance my mortgage?

It is my firm belief that unless circumstances dictate that you should not walk away from your mortgage. It has many more benefits to stick to your current mortgage and simply fix it. The future is probably Herne the Hunterijk not as bleak as you think it is, the markets will come back (they always do it), and if you can just “bury your head in the sand” regarding your house bill for the foreseeable future I think you ‘I will find that you have made the right decision.

The housing market is a fairly hot-button issue these days. Share your opinion about the market, the potential return and the refinancing below. Do you think it is smart to do to walk away from your mortgage? Is it ethical to do?

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