Why Not to Walk Away from an Underwater Home
Many firms are still promoting ‘strategic default’ or bankruptcy as a way for homeowners to escape being underwater and will twist the statistics to make it appear more appealing for their own benefit (it’s a great time to be an attorney).
But is it really strategic or smart?
If your home equity was to come back within the next 3 or 5-10 years and your home was virtually paid off what does it matter if you are temporarily underwater if you would really like to stay there?
Now on the other hand if you really believe it is going to take another 30 years to see your home value get back to what you paid for it (by which time we would have probably passed another boom and be back in slump town again) and you have 30 years left on your home loan then maybe you should ditch it and run? However, first very carefully weigh the true costs of your options, both financial and otherwise. Compare continuing to pay on your home as you planned originally versus wrecking your credit and financial future for the next decade by going through foreclosure. Which is cheaper really?
Make an educated decision.
Even if it isn’t about having a choice and you simply can’t keep up with payments to avoid foreclosure still don’t just walk away. Make sure you are released from the obligation to repay the debt and if you can get some cash to walk away with and know that you may still be able to sell your home as a short sale even if you are deep underwater. There is nothing strategic about having your clothes thrown out in the street by the sheriff and having nowhere else to move to…