subject: Are You Morally Obligated To Pay Your Underwater Mortgage? 4 Questions To Ask Yourself [print this page] If you're seeking underwater mortgage help, you may be considering strategic defaultin other words, walking away from your mortgage and letting the bank foreclose. It's a perfectly reasonable decision for some people with an underwater mortgage, but it's also one that many homeowners struggle with because they feel that walking away is somehow morally wrong.
However, if you ask many financial experts, they'll tell you that thinking of your mortgage in terms of right and wrong doesn't really make sense. Instead, you should think of it more in financial terms. With that in mind, here are four questions that you can ask yourself if you're trying to make a decision about walking away from your underwater mortgage.
Does your bank take morals into account when it makes business decisions? This may sound like a strange question, and of course, you can't know exactly how your bank makes its business decisions. But the key fact to realize is that mortgage lenders make business decisions, not moral ones. They're not thinking in terms of right or wrong when they walk away from a commercial property that's underwater, for example. In many cases, homeowners could benefit from adopting a similar attitude.
Have you made a good faith effort to resolve your underwater mortgage problems in another way? If you have an underwater mortgage and are considering strategic default, you've probably made an effort to resolve the issue in another way. For example, perhaps you've applied for home loan modifications or tried a short sale and had both fall through. If that's the case, walking away may be the only reasonable option.
Will continuing to pay your mortgage put your financial future at risk? Most people don't want to be "deadbeats." When you received your mortgage loan, your intention was undoubtedly to continue making payments until you owned the home outright. But at some point, paying your mortgage simply because you feel it's right may not be the logical choice. If you're harming your financial futuresuch as not saving for retirement or raiding a 401(k)to pay your bills today, then it may make more sense in the long-term to walk away.
Is strategic default the best choice for your specific situation? When it comes down to it, you need to evaluate your entire financial situation and make a choice about your underwater mortgage that is right for you. In some cases, that means pursuing loan modifications or simply staying put. In other cases, it means walking away and dealing with the consequences (including a dramatically lower credit score for a few years).
Dealing with an underwater mortgage is difficult. That's why Homeowner 101 created the Underwater Homeowner Assessment and Action Plan. We sit down with homeowners seeking underwater mortgage help and give them tools that allow them to look objectively at their options. That, in turns, gives them the information they need to make an educated, informed decision about their mortgage, instead of one that's based on emotion.
Homeowner 101 is an organization designed to give underwater homeowners Answers, Information, and Resources (A.I.R.). We offer the Underwater Homeowners Assessment and Action Plan, a resource for every homeowner who owes more than her house is worth whether youre having trouble making your mortgage payment or not.
