Friday, March 18, 2011

Walking away from your mortgage

There is this new trend going on that if your mortgage is worth more than the house value (meaning underwater) you should just walk away. This has been fueled by some books and experts to encourage people to walk away and their credit score would not be damaged much. I don’t get this phenomenon. I mean people bought houses of their own free will and nobody forced them to pay outrageous prices. They signed contracts that they will honor their obligations. Now when the day of reckoning comes, they just walk out of that contract thinking everything will be fine and dandy. If everybody does that then the housing market will be in the dumps and it will never recover.

I believe that if you are able to keep up with your mortgage payments you should not walk away from it. For example, do you walk away from your car loan payments just because your car is worth less than what you paid for initially? If you come to think of it, everything you buy on installment does decline in value, so are you going to return everything just because it happens to lose its value? And what about your credit score and your ability to get things later in life. I can understand that if you lost your job or you have some medical or family emergency that makes it financially difficult to continue mortgage payments but what about the people who can afford it but find it convenient to walk away from their obligations. I really don’t agree with this idea and unless you are in deep financial trouble, there is no reason not to fulfill your obligations.

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