Could you walk away from your mortgage.

[eliza61]

One in 4 borrowers are now underwater in their mortgage (the house is worth less than the mortgage).

I was reading a really interesting article from a regular guy who works at the wsj who is in the situation.
http://finance.yahoo.com/real-estat...of-an-underwater-homeowner?mod=realestate-buy

Anyway,
he suggests a link called www.payorgo.com which evidently will calculate should you continue to pay your mortgage or simply "walk away".

I don't know why but I just found the idea of someone actively suggesting people not pay their mortgage really distasteful.


http://www.payorgo.com/

 

[aprilgail2]

A friend of mine just did that- they had taken a home equity loan on top of their mortgage when housing prices skyrocketed here then they decided a few years later that they wanted to move near family in Florida- they could never sell the house for what they owed at that point since the market crashed. They had invested that home equity loan money in a vacation home in Florida - they walked away from the house here and moved to Florida.

 

[XYSRUS]

ITA-but it's like renting to those people. They probably didn't put any real money down when they made the purchase so they got what they wanted out of the deal and walk away. No skin off their back. I know about 3 people who have done this....and guess what? Not one of them misses a beat when it comes to buying new cars, gadgets, out to eat, etc...It's a long argument how anyone could buy a house as a NINJ-a: No income/No job. I'll save it for another day.

 

[wdwfan16]

ITA-but it's like renting to those people. They probably didn't put any real money down when they made the purchase so they got what they wanted out of the deal and walk away. No skin off their back. I know about 3 people who have done this....and guess what? Not one of them misses a beat when it comes to buying new cars, gadgets, out to eat, etc...It's a long argument how anyone could buy a house as a NINJ-a: No income/No job. I'll save it for another day.

There will lose the skin off their back when the 1099s from the bank arrive.

 

[allyphoe]

There will lose the skin off their back when the 1099s from the bank arrive.

In a no-recourse state (which the big walk-away states are), there's no tax consequence. Mortgages aren't like credit card debt, in that regard.

 

[LoraJ]

Is it true that if you do that the mortgage company will still come after you unless you file for bankruptcy?

Some people from another forum I am on did this or are in the process of. I think they got their advice from a site like that. I was listening to Dave Ramsey a couple of weeks ago and someone told him she wanted to do this and he said they would come after her. I want to find more information on this to show the girls from the other forum.

 

[allison443]

I liked the part of the article where he says "we are underwater, but we don't feel like we're drowning." Just wanted to clarify that the article author is not walking away, in case everyone doesn't read the article.
I live in the same county in NJ as the writer so I found it very interesting.
Thanks for posting it!

 

[NYCDiane]

I think a person has to make a decision..... Work and work to try & keep up on mortgage payments that they can't afford and will likely end up losing the house anyway. Or just let reality set in and move out and let it go into foreclosure.

There are so many people who are "upside-down" in their homes simply because they couldn't afford it when they bought it. They believed the hype that the housing bubble would last forever. They believed the house they bought for 400K (really worth 150K) would be worth 600K in a couple of years so they refied, took out HELOCs, etc..... In short, they fell hook, line, and sinker.

I had more than one opportunity to buy a house back then. I never did. I knew it was something I couldn't realistically afford and I know the bubble would burst. Right now, I am very happy in my rental apartment and am currently saving to buy a condo that I can afford.

 

[bumbershoot]

I doubt if I could. But if I did, it would be out of absolute desperation, not having any money to pay for it anymore.

I cannot stand the idea of someone doing it just b/c they owe more on their loan than the house is "worth" at the moment. That's just such a ridiculous, babyish, excuse IMO. I mean, we owed more on our car loan than the car was worth for over 2 years. Now, at last, it would be worth about 7K if we sold it, and with our next payment we'll be into the 3000s. But we didn't just stop paying b/c we were "underwater". We just kept plugging away at it, and since cars continue to lose value as the years pass, while a well built house doesn't necessarily do that, we were actually fighting time to get under that amount as we paid.

But ultimately, we're like NYCDiane...didn't buy even while everyone around us was. And we had to deal with some serious peer pressure from friends and family during that time...

 

[LoraJ]

I doubt if I could. But if I did, it would be out of absolute desperation, not having any money to pay for it anymore.

I cannot stand the idea of someone doing it just b/c they owe more on their loan than the house is "worth" at the moment. That's just such a ridiculous, babyish, excuse IMO. I mean, we owed more on our car loan than the car was worth for over 2 years. Now, at last, it would be worth about 7K if we sold it, and with our next payment we'll be into the 3000s. But we didn't just stop paying b/c we were "underwater". We just kept plugging away at it, and since cars continue to lose value as the years pass, while a well built house doesn't necessarily do that, we were actually fighting time to get under that amount as we paid.

But ultimately, we're like NYCDiane...didn't buy even while everyone around us was. And we had to deal with some serious peer pressure from friends and family during that time...

I agree about the idea of people just doing it because they are underwater. I think though that many of these people had ARMs that went up and they could not afford the mortgage anymore and could not re-finance because they were underwater. I was told to never get an ARM if you plan on staying in a house for more than 5 years. I think so many people got a lot of bad advice and did not do any research.

I could never walk away from my home like that. I bought a home I could afford on one salary with a fixed rate mortgage in an area that is still growing.

 

[disneymom3]

ITA-but it's like renting to those people. They probably didn't put any real money down when they made the purchase so they got what they wanted out of the deal and walk away. No skin off their back. I know about 3 people who have done this....and guess what? Not one of them misses a beat when it comes to buying new cars, gadgets, out to eat, etc...It's a long argument how anyone could buy a house as a NINJ-a: No income/No job. I'll save it for another day.

But how can they qualify for that stuff? Even a renting situation they generally check your credit don't they? Several years back in the first IT bust, DH was out of work for a LONG time. We weren't sure if we could keep the house. Thankfully at that time we at least owed less than it was worth, but I still wondered if we lost the house if we'd even be able to find somewhere that would rent to us.

 

[NYCDiane]

But how can they qualify for that stuff? Even a renting situation they generally check your credit don't they?

Back in the "bubble" days, they didn't bother checking your credit. ANYONE could walk in and purchase a home with NO money down, NO proof of income, NO credit check. It was insane. You would have people making less than 25K purchasing 350K homes that they could never realistically afford to pay for, no less maintain (taxes, repairs, etc)

 

[cats mom]

We know several people who are strategically defaulting, trying to get loan mods, even though they all say they can still make the monthly payments. Of course I certainly question their integrity, or lack thereof, so who really knows for sure. One work aquaintance has already told DH that if he doesn't get "a sweet deal" on a loan mod, he will have no problem walking away from the house. Nice.

 

[summerrluvv]

There is no tax liability for someone that walks away. A law about that was passed a couple of years ago (I think it's been a couple of years anyway).

The office I work for has been totally eliminating A LOT of 2nd and 3rd mortgages for people underwater.

 

[DMickey28]

I understand that if your ARM reset and you just plain and simple can't afford the mortgage anymore, what are you going to do? You have to walk away. I don't agree with how you got into the situation in the first place but that's done.

However, just because you owe more than it's worth but you can still handle paying it ... you should still pay it and live there and deal with it. That burns my behind more than anything ... A few of Dh's buddies are doing that and it just aggrevates me.

We also did not fall victim to MAJOR family and friend pressure to buy over the last few years. We ALMOST bought back in Spring 2007 in S. Florida ... major pressure from our parents that we were throwing away money in rent wth a baby on the way and major pressure from our "friends" who also were DH's business partners. We didn't cave and while for about 5 years we felt like the "losers" still renting ... we are now so far ahead of them. We got a sweet deal on an awesome house in a wonderful town that we don't see moving from for a long time. DH left that job for a HUGE career oppurtunity and we moved back home closer to family ... if we had caved then we would be "one of those people". We feels so lucky and blessed that we followed our guts and stood strong in our rental apartments!!

 

[Swimalie]

Back in the "bubble" days, they didn't bother checking your credit. ANYONE could walk in and purchase a home with NO money down, NO proof of income, NO credit check. It was insane. You would have people making less than 25K purchasing 350K homes that they could never realistically afford to pay for, no less maintain (taxes, repairs, etc)

We bought during the bubble days, 2006, and they checked our credit. They even told us our FICO score (said ours were some of the highest they had ever seen). Sadly, we bought when the prices were sky high and so many houses around us have foreclosed. Luckily, they have stopped around us now and luckily, we put 40% down so we stayed just above the "water" mark. But we're now out $150,000 if we tried to sell now. We're "stuck here and it sucks. We would love to move but we can't. Our house is nice and it's in a nice neighborhood but we want to leave this state. I hate this "stuck" feeling but I do know things could be a lot worse.

 

[blanq]

I guess I don't understand the thinking that you should walk away from your home just because you are upside down, owing more on your home than it is worth. Many, many car owners are upside down on their vehicles...a very common scenario for people who put little down on a new car and their vehicle drops in value the minute they drive off the lot. You never hear that scenario making people think about walking away from their vehicle.

If someone is upside down, but they can continue to make their payments, they should. Their home will increase in value over time, and eventually, hopefully they will be right side up at some point.

I personally would have a hard time walking away from my home, but if both my husband and I lost our jobs and could no longer make our payments, then maybe we would have very few options. I feel so bad for people who are in that situation. We are blessed in that we purchased our home in the early 1990's for very little money, and even though we have refinanced over the years, and renovated our home, we still have about 30% equity in our home, have a fixed loan at a rate of 4.75% and our payments are very manageable given our income.

 

[kellia]

The office I work for has been totally eliminating A LOT of 2nd and 3rd mortgages for people underwater.

Out of curiosity, how on earth do they do that? Those companies just get written off??

The whole thing really makes me mad. We live in Mich, where the economy has been bad for several years now, even before we made the news! We have so many friends and family who are or have been out of work (including us) and there are so many people struggling to get by. These people living in NORMAL houses who are really trying to keep them, and then you have these who are trying to cheat the system. I did have a friend who took advantage of things and left her house and bought a much nicer one, we are no longer friends, I just have no respect for her anymore. We couldn't sell our house even if we took a huge loss on it, there are just too many foreclosures to compete with. Just scares me that we are trapped if something happened and we had to move for a job, but otherwise, we just keep paying and I try not to look at what houses down the street are selling for!

What gets me is, these people will still have to pay back the money, right? I mean, a mortgage company isn't going to just "forget" that you owe them $100k or so. They'll track you down eventually, what happens then??

 

[wdwfan16]

In a no-recourse state (which the big walk-away states are), there's no tax consequence. Mortgages aren't like credit card debt, in that regard.

Try that on the IRS!

 

[wdwfan16]

Out of curiosity, how on earth do they do that? Those companies just get written off??

The whole thing really makes me mad. We live in Mich, where the economy has been bad for several years now, even before we made the news! We have so many friends and family who are or have been out of work (including us) and there are so many people struggling to get by. These people living in NORMAL houses who are really trying to keep them, and then you have these who are trying to cheat the system. I did have a friend who took advantage of things and left her house and bought a much nicer one, we are no longer friends, I just have no respect for her anymore. We couldn't sell our house even if we took a huge loss on it, there are just too many foreclosures to compete with. Just scares me that we are trapped if something happened and we had to move for a job, but otherwise, we just keep paying and I try not to look at what houses down the street are selling for!

What gets me is, these people will still have to pay back the money, right? I mean, a mortgage company isn't going to just "forget" that you owe them $100k or so. They'll track you down eventually, what happens then??

Read the IRS website. They talk about it and it is not as she implies. There are cases where it is written off but many will not be.