What Really Happens if You Default on a Mortgage?

When you default on your mortgage it is very likely that your credit will take a huge hit. In order to be financially safe and sane you will need to plan in advance once this happens. You’ll have to save up money and make sure your rent is low enough that you can afford to put down a down payment. You will be able to get back on your feet but you will have to do the work to avoid further hardship.

Key Takeaways:

If you are overwhelmed you can default on paying your mortgage, but it comes with downsides.
For example, your credit score is guaranteed to go down significantly.
In the future it will be more difficult for you to purchase a house and you will need to save extra cash.

“The Mortgage Forgiveness Debt Relief Act of 2007 was enacted to allow homeowners who lost their homes through short sales or foreclosures to escape a major tax penalty for mortgage debt that was forgiven.”