On Walking Away
Is it okay to walk away from your mortgage for no other reason than it doesn’t make financial sense to keep throwing your hard-earned money away? There’s no universal answer here, but in most cases, the answer is “Yes.”Importantly, the reason is not that “Wall Street deserves it” or “We’ve got to teach the banks…
To err is hyman to continue is diabolical. Get out and don’t look back.
In some states, the lenders recourse is to the mortgaged property only. In other states, including New York, borrowers are personally liable for any deficiency.
northsloperenter–Ok, so fair points, but securitization also increases the quantity of capital available to the housing market (too much in recent years), housing supply is not fixed, so just by supplying new capital to mortgages you’re not necessarily just bidding up the cost of the existing housing stock. I would also have to think because housing stock is larger the cost is also lower like for like? Also you’re right that the govt makes 30 year fixed rate mtgs possible, but they do it through the securitization market no? Anyway. My more basic point is that securitization need not be evil.
agreed, northsloperenter. Most definitely.
fsrg- I probably wasn’t clear enough. I was trying to say conflicting moralities- honoring the contract and not honoring it to take care of your family. I’m basically disagreeing with Blodgett’s contention that there is no moral obligation in paying a mortgage. I think there is, but it wouldn’t take precedent over my family.
“I still can’t imagine it makes walking out on a mortgage any easier for someone. ”
Depends on the person, I suppose.
I would certainly find it easier to walk away if my reason was “it is the best thing for my family” rather than “it sticks in my craw that housing prices have dropped so much since I bought my house and I’m pissed at the wall street bailout”.
“I dont know about you but personally I’d like my mortgage rate to be low. In terms of for society at large I guess it makes home ownership more affordable.”
It doesn’t really work that way. Low mortgage rates do not make home ownership more affordable if they also increase home costs (which is exactly what they do). Total cost of ownership is what matters, and that is a function of mortgage rates, tax policy, and housing costs.
“I’m not an expert on the mortgage market but I’m told 30 year fixed rate mortgages are only made possible in any great quantities becuase they can be pooled and risk-managed with derivatives.”
No, they are made possible by the US government’s involvement in the mortgage market.
northsloperenter- I certainly would but I still can’t imagine it makes walking out on a mortgage any easier for someone.
Benson… I would never get a loan based on my bathroom. 🙂