A new category of homeowners has emerged in recent months–those who voluntarily walk away from their mortgaged property. The rising ranks of this group are not comprised of people who can’t afford their mortgage payments and thus go into foreclosure; rather these defaulters are homeowners who choose to let their Mobile Eastern Shore real estate holdings go rather than continue to pay on a home which is worth less than what they owe.
Such a phenomenon is new to the United States, where proud homeowners of the past would make every sacrifice necessary to keep their home–and their dignity–and it is a thorny issue in terms of moral responsibility and finances.
The Mortgage Bankers Association has voiced concern about the message these “walkers” send to their families and the community, and even President Obama has urged homeowners to follow the responsible course and honor their financial obligations. Such words too often fall on deaf ears, however, as anxious owners of Mobile Eastern Shore real estate watch lenders unload their mortgages with impunity and private businesses practice “strategic default” by letting a company fail rather than continue putting money into it.
One prevailing viewpoint is that homeowners must operate under a moral constraint while lenders and businesses are free to maximize their profits–an unfair and unbalanced system in the eyes of the “walkers.”
There are, of course, many social, moral, and financial arguments against voluntary default. An increase in foreclosures in a community depresses the value of the homes and drives prices down, thus making your neighbors suffer the consequences of your choice. In a May survey conducted by the Pew Research Center, nearly 60% of Americans believe it is ethically and morally wrong to default on a mortgage contract with a lender. Perhaps having a greater impact, however, are the financial repercussions of simply not paying the mortgage on your Mobile Eastern Shore real estate, including the following:
- Your credit score will suffer, thus making it extremely difficult to get loans for a car or for another home, renting a house, and possibly having a negative effect on insurance rates and job possibilities.
- Debt consequences: In many states the lender can get a deficiency judgment against you to recover the funds you did not pay. The term of their ability to do so may be as long as ten years.
- You will lose your tax break. Property taxes and mortgage interest often give you a sizable tax advantage in terms of deductions, which you will no longer have.
- Returning to the housing market may prove quite difficult. Although renting a home is a tempting solution, more and more landlords are hesitant to rent to someone going through foreclosure. Buying another property presents another obstacle. With stricter requirements being placed on loan current loan applicants, a “walk away” will not have an easy time overcoming his poor record with lenders.
If you are considering walking away from your current home, do weigh carefully the consequences of doing so. You can calculate the financial impact of such an action here.
The Judy Niemeyer Team knows that selling or buying a Mobile Eastern Shore home is a major event in your life. It represents one of the largest single investments you may make in your lifetime. It is, therefore, our Goal to make this experience a seamless one. Whether buying Mobile Eastern Shore real estate or marketing Mobile Eastern Shore homes for sale, we will provide unparalleled professional, quality service and the most productive approach to achieving your goals.
You can contact Judy by email or by calling 251-990-0569.