To default or not to default. Many are the things to consider when one's mortgaged property
falls in equity due to market price drops of the real estate properties. People are sometimes naturally obstructed in paying off their monthly mortgage installments due to unemployment, illness or divorce. However there are people who are able to pay their debt, but neglect to do so when they note that they owe more than their overall house worth. Whether their actions should be deemed as right or wrong could be only determined when examining each case individually. Still for the sake of the argument we will generalize the problem and try to consider both the benefits and the disadvantages of defaulting on one's home mortgage loan.
The reasons why some decide to desist paying include an attempt to avoid the disadvantageous situation they are in. People usually fall for the misconception that they may find another property to rent within the same area at much advantageous rates than the ones required for covering the outstanding mortgage. People may also desire to free themselves from the long term debt engagement and relocate their budget. Along with eliminating the responsibility and the avoidance of the short-sale procedures factors the default alternative becomes quite tempting in the eyes of the majority.
However the reality is quite different. The consequences of not complying with one's mortgage payments are much more serious than the simple moral qualms. The essential negative impact affects one's credit score. Having a bad credit score triggers many negative outcomes like inability to be granted with another loan or even rent a desired apartment. If one nevertheless gets the approval of a lender or landlord the conditions of the contract would be very disadvantageous characterized by high rates and unfavorable terms. This situation may last for years to come and what is more the taxes on the "forgiven" debt will be due given that the canceled debt would be considered as added income by the IRC. In several states the legislation allows the lenders to go after the borrower demanding the difference (deficiency) in the money owed and the amount gained on the property's sale. They will target one's saving accounts, other properties, automobiles and salaries.
Having weighted the pros and cons of the underwater borrowers' default strategy one can easily discern that avoiding paying on his home mortgage loan is a decision one shouldn't make lightly. To be thoroughly aware of his option he should reconsider the refinancing programs available and if still in doubt to turn to counseling services which could educate him further on the issue.