According to recent surveys done across the US, more and more people that are upside down on there mortgage are purposely starting to default. People are finally waking up to the reality of there situation and making a conscious decision to just stop paying. I can’t say that I blame them. Don't let news reports talking about the "economic recovery" fool you - the Florida real estate market isn't coming back anytime soon. It will most likely be years before it even starts to recover. Even if you’re in a position where you can still pay your upside down mortgage, does it make financial sense to keep throwing your money away on a bad investment? Think about it…every dollar you put toward this losing proposition is money that you could put towards securing your family's future.
Some of you may be asking this question… “Don’t I have a moral obligation to keep paying on my mortgage?” The truth is that you entered into an arms-length transaction with your lender in which both of you had competing interests and thus spelled out your obligations in a clear, signed contract. Unless the contract states that you have a "moral obligation to pay," then it's plain and simple - you don't.
Here are the facts; when you borrowed the money to buy the property, you entered into a business transaction. The lender evaluated the risks and concluded that it was a risk worth taking. For its protection, the lender also required you to put the house up as collateral, as well as any equity you had in the house. The contract spelled out that if you don't pay, the lender has the right to take the property and sell it before you get any of your equity back - if there were any equity left, which of course there isn't if you're upside down. The lender would not have given you the loan if they didn’t think it was a smart business decision. Your choice to enter into this agreement was also a business decision.
You decided to borrow the money and put the property at risk your equity, and your credit rating. It's obvious now, in retrospect, that both you and the lender made a bad decision. At this point the contract spells out what happens if you stop paying: the lender gets the property. However, there are other options like doing a “short sale”, “deed in lieu” or a loan modification. Doing a “Deed in Lieu” is where you sign the deed over to the bank and is basically a voluntary foreclosure which stays on your credit for up to 7 years…ouch! Most loan modifications that get approved just don’t make financial sense unless they reduce the principle balance of the loan. In my opinion, doing a short sale is by far the best option. By doing a short sale you are able to get your house sold and walk away from the responsibilities of the mortgage. Also, there are programs now like HAFA [Housing Affordable Foreclosure Alternatives] where you can receive up to $3,000.00 back from your lender. As far as your credit is concerned, you’ll only have some late payments to deal with and just about any decent credit repair company can get that off of your record within a year.
Be honest with yourself, there's more to it than just money. You want your life back! You want to stop spending your days thinking about your mortgage and living with the constant stress of worrying what's going to happen to you. You may have gotten used to having this unending pressure in your life, but you probably should stop and take a moment to think about what it's costing you.
Your value as a person is not determined by the value of your real estate, or how much money you owe to a bank. You are worth more as an individual than your bank will ever understand. Life is too short, and there are so many things more important than an underwater mortgage. For many people, it's literally the difference between happiness and depression; a smile and a frown; health and disease; hope and despair. Go speak with a real estate professional and find a solution; you owe it to yourself and your family. I'm here to help, it's up to you to take the next step.
