Comments on: So What Exactly Is Keeping You In Your Current Mortgage?

By: Clintus

Clintus — Thu, 03 Dec 2009 03:12:01 +0000

I’m in that situation. Owe $160k on my house and it’s only worth $110k these days. Monthly payment is fine but we’re starting to grow out of our house and want something bigger. I don’t want to F up my credit but what the hell am I suppose to do?

By: Justin

Justin — Mon, 30 Nov 2009 03:08:28 +0000

Thanks for taking the time to write this — I have already referred people to it a handful of times and will continue to do so.

I love that a “non mortgage guy” can articulate this issue so when people ask me what they should do I can just shrug and point them here.

By: James Windrow

James Windrow — Mon, 30 Nov 2009 02:06:53 +0000

This is a conversation I’ve had with my wife multiple times. We bought a beautiful home at the peak of the market. Like many fiscal responsible family’s we bought a house we could a afford and locked in a decent rate (6.5%). Currently we’re about $100K upside down based on the latest comps from the neighborhood.

In April when rates dropped to 4.5% I tried to refinance but was declined because I’m so severely upside down in my house. So I attempted to modify my loan. After 5+ months of Chase ignoring me they final responded by declining my request because we exceed the income threshold.

So to recap. I’m screwed because I’ve made fiscally responsible decisions while my tax dollars are rewarding families who’ve made less responsible decisions.

F*ck the banks for pumping so much money into the market and jacking up prices and then screwing those of us that they should be thanking for paying our mortgages in full and on-time.

By: Russ

Russ — Sun, 22 Nov 2009 02:27:07 +0000

Anyone significantly underwater in a non-recourse state like Arizona should probably just go ahead and walk away. After the largest housing bubble in American history, bubble price highs will not return nominally for a long time, and adjusted for inflation, will probably never return.

If you had asked me what to do in 2005-2006, I would have said sell any bubbly RE and rent a modest house in the same area (what I did). Now, same advice, except the side benefit is a damaged credit score instead of a large savings account balance. With Arizona’s anti-deficiency laws, no legal judgments will haunt you and the social judgments have largely evaporated.

Some might ask why. Because walking away/shredding your credit is the only way to fix the mistake of overpaying for/over-borrowing on a house. A life event is likely going to occur that requires a sale of the underwater house long before it gains six figures in value. Might as start the credit healing now.

By: francine hardaway

francine hardaway — Wed, 18 Nov 2009 04:30:41 +0000

The only reason I don’t walk away from my house in Half Moon Bay is that I can’t afford to have my credit score go down or my lines closed. There’s no question that to walk is the right business decision from a pure cash on cash position. I’ve been talking about it to Ed and my family for a year. I feel stupid staying in my house and throwing money down the toilet. And yes, I’m current. And yes, I’ve tried to modify. And no, they won’t. Because I’m current.

By: Ryan Gasparini

Ryan Gasparini — Mon, 16 Nov 2009 20:59:15 +0000

The day I stopped paying was the day they threw the book at me. It would be nice to have a choice whether or not to “walk away” or stay. However, I look at the bright side of my short sale and unemployment – I’ll gladly choose couch surfing over being “underwater” in a vapid and unsustainable sprawl.

By: Mike Hughes

Mike Hughes — Mon, 16 Nov 2009 17:14:36 +0000

DG – your scenario is the exact scenario that irritates me. You didn’t put any money down, you haven’t paid your mortgage in a year, but you’re still living there. If you’re going to walk away, walk away. You have *zero* right to be in that house and I’m sure you know it. It’s that kind of entitlement that got us into this mess in the first place.

By: DG

DG — Mon, 16 Nov 2009 15:43:09 +0000

A short might not get approved, but you can easily stop paying and just allow the place to foreclose. It depends on the state, but CA is non-recourse and probably has the most overall negative equity of any state. If you walk away in CA the bank has to write it off even if you have a million dollars in the bank. You also don’t get taxed because it is treated as a sale… If you have lived there at least 2 years you won’t have any taxes. I personally think walking away if you are only $60,000 in the hole is probably not the best practice, especially if you put $60,000 into it . I am $250,000 down on the home I bought in 2006(put $0 into it). I haven’t paid my mortgage since December of last year and they still have not foreclosed. I expect to be booted in the next few months, and when I am my net worth will go from -$240,000 to about +$10,000. It will be real nice to be debt free. Living a cash only lifestyle is actually quite liberating. Debt is the current form of slavery.

By: Mike Hughes

Mike Hughes — Mon, 16 Nov 2009 15:19:47 +0000

Good points, Mike D.

By: Mike D.

Mike D. — Mon, 16 Nov 2009 07:16:02 +0000

A very important part you’re forgetting – if, as you mentioned, you have the ability to keep paying your mortgage as it was written, you /can’t/ just walk away. Your short sale would never be approved as there’s no “hardship” situation, and if you just stop paying it’s pretty easy for the banks to get a judgement in their favor if the income is still there (essentially call your whole loan balance immediately due), and likewise you can’t skip out on the note via bankruptcy if you still have positive cashflow.