Walking away from your house/mortgage

[TwoGloves]

Anybody done it? Here's the story: I'm in one of the most economically depressed areas in the country. My house is going to be worth barely more than I owe when the property values drop again this year and the house next door to me (which is in pretty good shape) just sold for $3K after being foreclosed on a few years back. I'm going to be moving in with my girlfriend soon and the last thing I want to do is put a couple of grand into my house and make mortgage payments for a couple of years only to see it not sell (which I am POSITIVE it won't for more than I owe). I still have 12 years of payments to make. So I'm wondering, other than having my credit rating go in the dumper (which I really don't care about since I'm driving a new car) what kind of consequences am I looking at? Will the mortgage company sue me? Anybody? Anybody? Bueller? Thanks in advance!

 

[YGBFKM]

I don't know much about this, but new car or not, I would be horrified at what this would do to my credit rating. Seems likes all kinds of potential trouble down the road.

 

[Stitch]

I don't know much about this, but new car or not, I would be horrified at what this would do to my credit rating. Seems likes all kinds of potential trouble down the road.

Your credit rating can get repaired and you probably could get a house in a few years without any other blemishes. The problem is the difference from what the bank gets from a foreclosure sale and the balance on your mortgage would be considered income.

 

[Babyjay]

And don't forget the moral angle of living up to a responsibility you took on. It doesn't sound like you're destitute. It sounds like you can afford the payments. So you should make them until you sell the house.

 

[RickStain]

That really depends on the state your are living in.

But **** the moral angle. You entered into a business agreement, which specifically stated what would happen if you didn't pay. You certainly have the moral right to stop paying if you agree to accept the consequences.

 

[YGBFKM]

That really depends on the state your are living in.

But **** the moral angle. You entered into a business agreement, which specifically stated what would happen if you didn't pay. You certainly have the moral right to stop paying if you agree to accept the consequences.

Personal responsibility is so 20th century.

 

[RickStain]

That really depends on the state your are living in.

But **** the moral angle. You entered into a business agreement, which specifically stated what would happen if you didn't pay. You certainly have the moral right to stop paying if you agree to accept the consequences.

Personal responsibility is so 20th century.

There's nothing irresponsible about it. Our entire economic system is based on the idea that everyone should pursue their own best interests within the confines of the law and any personal agreements that are made.

If an agreement says "You will do X, or else face Y," there is nothing immoral or irresponsible about choosing to face Y.

 

[maberger]

check the state where you're living. Some -- california among them -- do not allow the lender to chase the owner for anything owed. consider what the default will also do to aby other credit you have outstanding -- including changing the terms of your loans and even calling them (including credit card balances).

how long is you mortgage? what's difference in pricing where you live between renting and owning,and will anyone rent to you after your credit plummets? are you no longer collecting the interest mortgage deduction? why are you selling in a couple of years? in other words, why wouldn't you just keep living there?

 

[TwoGloves]

Basically, I'll be getting married in the next six months or so otherwise I'd keep living in the house. As for my moral obligation, uh, my city has one of (if not THE) highest unemployment rates in the country. I lost my job but when I got it back I took a HUGE pay cut. I'm barely making ends meet as it is and when I tried to contact the mortgage company about getting some help they were major pricks and said I wasn't eligible if I could make the payment. Which I can but then what do I do when I move? Continue to pay on a house I can't sell next 12 years and have no money to contribute to my new household? And the way things are going here, nobody is going to rent the place for anywhere near what I'd need them to. There are so many available places around here. No offense, but **** my moral obligation. Where was the moral obligation of all the Wall Street big wigs who helped get us in this mess and why should I worry about a mortgage company that doesn't give a **** about me? I'd love to find a better answer but right now I don't see one. And I don't want to make mortgage payments for two years only to be stuck with a house I still can't sell.

 

[imjustagirl]

Why doesn't your wife move in with you instead and you keep that house?

 

[imjustagirl]

Oh, and some info:

http://www.youwalkaway.com/

http://articles.moneycentral.msn.com/Banking/HomeFinancing/WhenToWalkAwayFromAMortgage.aspx

 

[Babyjay]

Some states don't allow lenders to chase borrowers for what they contractually promise to pay? No wonder modern society doesn't understand personal responsibility.

TwoGloves, I'm sorry about your layoff and pay cut. Really, I am, and I'd probably be more sympathetic if you had mentioned that in the first place. But there are always options. Why can't your girlfriend sell her place and move to yours? Or rent your place; even if you don't make the whole mortgage, you'd be making most of it.

Your comments about driving a new car so you don't care about your credit rating and "I don't want to make mortgage payments for two years only to be stuck with a house I still can't sell" don't sound like a guy who's broke and going under. They sound a guy who's pissed off and just looking for any way out.

 

[RickStain]

Get a financial advisor or at least someone you know who is good with numbers, sit down, and make *sure* you are coming out ahead on this deal. A lot of people want to do this as an outlet of their frustration over their economic situation, but it's not always the best option.

 

[RickStain]

Some states don't allow lenders to chase borrowers for what they contractually promise to pay? No wonder modern society doesn't understand personal responsibility.

The fact that they can't do so, and will have to settle for taking the value of the house, is priced into the mortgage. If they don't want him taking this option, they can at least refund the extra interest they made him pay on the assumption that this was a possibility.

 

[Stitch]

Some states don't allow lenders to chase borrowers for what they contractually promise to pay? No wonder modern society doesn't understand personal responsibility.

The fact that they can't do so, and will have to settle for taking the value of the house, is priced into the mortgage. If they don't want him taking this option, they can at least refund the extra interest they made him pay on the assumption that this was a possibility.

I don't have a problem with it on its face. This is not a moral issue, it's a business issue. Do you think newspaper companies had any moral obligation to pay their bills? Do you thinking developers of the Songbird project in New Jersey have an obligation to finish the job?

I don't think so, because it's spelled out what happens if you don't meet the terms of the contract. Same with mortgages. If you don't pay, you don't own the home anymore. It's pretty simple.

 

[podunk press]

I think you've made your decision already.

I'll say this. I'm in Year 5 of a 30-year mortgage. I doubt I ever sell my house for what I paid for it. Money's tight. But you know what? My wife and I keep fighting, keep paying and keep hoping that the environment around us will improve.

And that's my decision.

To each their own, I guess.

 

[imjustagirl]

I'm trying to find a place I can afford to do a 15-year mortgage on. I've never lived ANYWHERE longer than two years that I paid for (family homes not included). The idea of living in one place for 30 years scares me.

 

[LongTimeListener]

And don't forget the moral angle of living up to a responsibility you took on. It doesn't sound like you're destitute. It sounds like you can afford the payments. So you should make them until you sell the house.

The moral angle went out the window a looooooooong time ago. If you've been paying even the slightest bit of attention, the banks' predatory tactics will sicken you. Screw them.

New York Times had a great story a few months ago about the high numbers of foreclosures in the million-dollar home set compared to lower-priced homes and people who keep grinding it out. Their conclusion was that richer people have an easier time being cold and pragmatic and doing what's best for them, forget everyone else.

http://www.nytimes.com/2010/07/09/business/economy/09rich.html

 

[maberger]

Some states don't allow lenders to chase borrowers for what they contractually promise to pay? No wonder modern society doesn't understand personal responsibility.

TwoGloves, I'm sorry about your layoff and pay cut. Really, I am, and I'd probably be more sympathetic if you had mentioned that in the first place. But there are always options. Why can't your girlfriend sell her place and move to yours? Or rent your place; even if you don't make the whole mortgage, you'd be making most of it.

Your comments about driving a new car so you don't care about your credit rating and "I don't want to make mortgage payments for two years only to be stuck with a house I still can't sell" don't sound like a guy who's broke and going under. They sound a guy who's pissed off and just looking for any way out.

listen, i understand your frustration but the business agreement say you promise to repay the loan OR we take the property. NOT, you fail to repay AND we take the property AND we chase you to continue to repay. If you cant afford it, you cant afford it, but this doesnt sound like a personal responsibility issue here. the bank doesnt get to have it both ways, where you lose the asset AND still pay for it.

 

[RickStain]

Some states don't allow lenders to chase borrowers for what they contractually promise to pay? No wonder modern society doesn't understand personal responsibility.

TwoGloves, I'm sorry about your layoff and pay cut. Really, I am, and I'd probably be more sympathetic if you had mentioned that in the first place. But there are always options. Why can't your girlfriend sell her place and move to yours? Or rent your place; even if you don't make the whole mortgage, you'd be making most of it.

Your comments about driving a new car so you don't care about your credit rating and "I don't want to make mortgage payments for two years only to be stuck with a house I still can't sell" don't sound like a guy who's broke and going under. They sound a guy who's pissed off and just looking for any way out.

listen, i understand your frustration but the business agreement say you promise to repay the loan OR we take the property. NOT, you fail to repay AND we take the property AND we chase you to continue to repay. If you cant afford it, you cant afford it, but this doesnt sound like a personal responsibility issue here. the bank doesnt get to have it both ways, where you lose the asset AND still pay for it.

Well, that depends on the state and the agreement.