Many homeowners with a mortgage that is more than their house’s value tend to walk away from their debt, but the hidden financial costs of this process may be severe. Instead of going through a strategic foreclosure with the bank, you could wait out the process hoping that the market will change in the future or ask for a principal reduction. Other options include short selling your home, refinancing, modifying the mortgage terms, or utilizing a deed-in-lieu of foreclosure. Finally, you’ll need to understand that this debt will hurt your credit score, hurt your chances at a future mortgage, and may have heavy tax implications.
Key Takeaways:
- A loan is underwater if the house is valued at less than the current amount owed on the mortgage.
- A strategic foreclosure is defaulting by doing the math and figuring out it is best to let the mortgage go.
- It’s possible to look for a loan modification or a principal reduction. When things are not save-able it can be best to short sale the home.
“Check your mortgage account online or look at a recent paper statement for the unpaid principal balance. This is the amount you still owe on the mortgage.”
Read more: https://www.bankrate.com/finance/mortgages/risks-of-walking-away-from-mortgage-debt-1.aspx