Ways to Avoid Walking Out on a Home Mortgage

Posted on December 22, 2009
Filed Under Refinance Mortgage | Leave a Comment

More homeowners face foreclosure on their homes because they cannot make the mortgage payments. Instead of just walking out on a home mortgage, try the following steps and avoid a ruined credit history or worse.

Why People Are Walking Out Of Their Mortgages

Abandoning your home is a recent phenomenon, spurred by the ballooning rates of sub-prime mortgages. Some companies are even assisting homeowners with “walk away” programs. While the trend has been most prominent in areas where house prices have fallen dramatically, like Florida, Nevada and California, it is growing into a nationwide issue.

Hypothetically, you can live in your home rent-free for at least eight months, or until the bank evicts you, in order to pay off other debts. You can use the money you save as a down payment on another home that is less expensive. Others are walking away even if they can afford the mortgage because they did not place money down and their home is worth less than they owe.

Why Walking Away From Your Home Doesn’t Work

Over half of the people who choose to walk away never consult their lenders. Some feel entitled, arguing that their terrible loan is not their fault or that they were deceived about housing market conditions. Others believe they are getting back at their lenders, or that seven years of terrible credit from a foreclosure is acceptable.

But, it is your job as a consumer to read up on all the facts and know what you are signing. Having poor credit for nearly a decade can affect everything from being able to buy another home to finding a job. Poor credit scores increase your cost of living since the interest rates will always be higher.

How To Avoid Walking Out On Your Home Mortgage

While it seems like an simple solution, walking away just does not work. Instead, contact your lender or mortgage broker and try to come up with a plot that works on both ends. Many mortgage companies are unwilling to change the terms of the loan, but some are flexible regarding interest rates or extended loans. By talking to someone, you own up to consumer responsibility and saving yourself years of terrible credit history.

If your lender cannot help you, talk to the bank about a small sale. In these situations, the bank lets you sell your home for less than you owe. A deed-in-lieu is another workable resolution, where the bank takes your deed instead of a loan payment. Regardless of how you solve the problem with the bank and lending company, walking out of a home mortgage will be far worse for your finances.

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