10 reasons people are walking away from mortgages
Allowing foreclosure on purpose
Many people have reasons for wanting to stay in their home, regardless of how much they’re paying. People don’t want to uproot their families or don’t want to go through the hassle of moving. However, some people are so fed up with the housing market that they’re willing to allow their mortgages to go into default and walk away from their property.
Those who choose this option generally don’t have a whole lot of money already invested in the home, don’t have kids or actually cannot afford the monthly payments anymore. Even those who got the best personal loan rates are looking at what their house is worth versus what they are paying for it and deciding that allowing foreclosure is the best decision. Here are some reasons people have chosen to do so.
10. Cheaper monthly payments
Some homeowners, realizing that it could be years before they’d be able to make a profit on their home, have decided to let their mortgages default in favor of paying less expensive rent each month.
9. Too long to wait for profit
People who purchased property before the recession and have owned it only a few years, believe they’ll save money in the long run if they simply let the bank take the house. One condo owner in Miami says he believes it could take until 2025, possibly 2040, for his condo to be worth what he paid for it again.
8. Need to move now
Many people who have to move because of employment or other reasons are finding that letting the bank take the house is simply faster and easier than trying to sell right now, in a market where no one wants to buy.
7. Political outrage
A lot of people simply are angry that the Wall Street executives who got bailed out by the government are getting bonuses again, while they are struggling to pay mortgages on practically worthless property.
6. Loan modification disappointing
The federal loan modification helped some people somewhat, but many feel it wasn’t enough. The New York Times says the plan “raised the expectations of many but satisfied only a few.”
5. Home is worth 75 percent of purchase price
Research cited in the New York Times says that once property loses 25 percent of its value, homeowners begin to seriously consider walking away.
4. Fear of future deflation
Though many economic experts believe the housing market will eventually return to normal levels, some people worry that their property will only depreciate in value. They don’t want to continue to pay for something that is losing value every day.
3. No encouragement or improvement
Though some economic indicators point to improvement, the housing market has stayed stagnant. Many people who aren’t planning to stay in one place for long, and thus foresee ending up trying to sell worthless property, would rather just let the bank deal with it.
2. No sentimental value
Sam Khater, a senior economist with First American CoreLogic, the firm that conducted the recent research, said part of what motivates people is that they simply become unattached to their homes when they decrease in value so much. “People’s emotional attachment to their property is melting into the air,” he said.
1. All of the above
For most people who decide to go through with walking away from their homes, it’s a combination. The frustration of “feeling like a sucker,” the lack of government intervention, the high monthly payments, low property value and bleak outlook are too much. They’d rather simply mail their keys to the bank and walk away, free from future financial burden and a failed investment.