Foreclosure: Walking Away is Not the Answer
November 18, 2008
During the height of the housing boom, getting a home loan was easy. Lenders offered attractive incentives like low down payments and low initial interest rates. However, once the bubble burst, housing values plummeted as obtaining a loan became increasingly difficult. Now, many homeowners that took advantage of the lending boom have found themselves living in homes that are worth less than they owe on them.
Since they are falling behind on the mortgage and they cannot recover the money by selling, an increasing number are opting to let the bank take the home in foreclosure. Called walking away, this may not be the best course of action.
Someone considering letting the lender foreclose and simply walking away from the property may not have considered all the effects that a foreclosure can have. Having a foreclosure on your record may make it harder to get a new mortgage for at least five years. There is also the effect of foreclosure on your credit score to consider. With loans being much harder to get even for the best qualified consumers, you need to protect your credit rating at all costs.
Walking away from a home because you don’t like owing more on your home than the current market value is a bad idea. Home values rise and fall periodically - after the current market conditions have stabilized they will likely rise again. If you walk away now you’re locking in your losses rather than possibly reaping gains in the future.
Of course, if you can’t afford to make the mortgage payments then you may decide to walk away. But before you do, be sure to contact an experienced foreclosure lawyer to help you determine your best option.
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