If abandoning your mortgage loan and turning in the keys to your home has been on your mind lately then join the ranks of over one-third of homeowners in America. According to a survey recently conducted by the Pew Research Center, 36 percent of homeowners believe it’s acceptable to stop paying a mortgage and walk away from a home if the circumstances call for it.
Circumstances That Warrant Walking Away
The new Pew study has shed some light on the difficult circumstances of the recession. Clearly, very few people purchase homes with the idea that they will later be walking away from them. However, if faced with an underwater mortgage or the lack of a sufficient income, some say it may very well be necessary to hand their keys over to the bank.
In the survey, 19 percent of respondents said that it is “acceptable” to abandon their mortgage loan when necessary without further explanation, while 59 percent stated taking this action is “unacceptable.” What is interesting about the survey, however, is that 17 percent of respondents answered that abandonment was acceptable depending on the circumstances, which was not even an option listed on the survey.
Options to Help You Avoid Handing Over the Keys
If you’ve been feeling like walking away and accepting foreclosure is the only thing you can do, it’s important to know that there are other options available that could save your home and your credit, including:
- Talking to your lender: This should be your first line of defense. If you’re having financial problems, many lending companies will understand (this is a recession, right?). So try talking about options for refinancing your loan, or even having your principal deferred for a few months until you get back on track.
- Selling your home: While the housing market is tough, some people are still buying. So before handing over your keys, you could consider selling your home, even if you must make it a short sale just to get it off your hands.
Also, if you currently have an underwater mortgage, you may be able to take advantage of the FHA Short Refinance program that will help some homeowners refinance at lower rates. It could give you a clean start and, most importantly, keep you in your home.
There are tons of options available to homeowners in need, so before you walk away from your loan, consider all other possibilities. This way, you may not have to deal with the financial and emotional stress that comes with losing your home.
There are certainly situations of desparation where job loss, catastrophic illness or decreased income means that letting your home fall into foreclosure might be the only option. Note, that I said desparation, not discomfort. My own home mortgage is upside down, which is scary and uncomfortable, but that has nothing to do with my ability to honor the contract that I entered into when I signed my loan papers. Declining property values are a risk to anyone entering into the real estate market. Foreclosures and short sales need to be considered a last option. They will destroy your credit, reducing your score 150 – 250 points and will aid in preventing our housing market from recovering. Also, short sales may be taxable events to the homeowner.
For more information on upside down mortgage refinance and information on the President’s “Making Home Affordable” refinance program check out my website at
http://www.homeownersrefinance.net/Upside-Down-Mortgage-Refinance/index.htm