Davey Jones’ Mortgage
Posted by mmetz on March 12th, 2010
By this point we are all well aware of the housing situation this country is in. According to CNN, nearly 25% of all mortgages are deep underwater, meaning the borrower owes more than the house is worth. Some states have homes closer to Davey Jones’ Locker than others, such as Michigan who has 39% of all of its mortgaged properties underwater. As scary as that number is, it doesn’t even come close to Nevada’s 70% underwater rate!
With all these mortgages being higher than the home value, many people are deciding to walk away from the home and take a foreclosure hit. The sad thing is some of these people can afford the payments and are just doing it as a strategic financial move.
At the time this may seem like the best/only option, but when you step back and look at the situation, walking away from an underwater house is never a good decision.
You are going to have to live somewhere after you walk away from your home and foreclosing leaves a huge black spot on your credit score for seven years! If you think that you’ll just rent till it goes away, think again. Renters are now starting to check credit scores to see if their potential tenants will be able to handle paying their rent on time.
Strategically walking away from a home not only hurts your credit score but your integrity as well. When you sign a contract for a mortgage, you are giving your word that you will pay this money back to lender. So financially it may benefit you but you might have to compromise some morals to make it work.
There are your neighbors to think about in this underwater situation as well. When you walk away from a house, this decreases your neighbor’s home value. Just think how you would feel if your home dropped in value, all just because someone decided to make a financial move and foreclose on their home.
Sure your home might be stuck in the briny deep leaving you stuck paying more than what it’s worth, but have some faith in the future of housing and realize your home value will eventually start to increase.
What are your thoughts on walking away on an underwater home?
Source: CNN Money
Photo by: Davidbaker // CC 2.0
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