What are the repercussions of walking away from a home that is underwater?
Get Legal Help Today
Compare Quotes From Top Companies and Save
Secured with SHA-256 Encryption
What are the repercussions of walking away from a home that is underwater?
I have owned my home for 7 years. I have been paying additional premium each month. I just had it appraised, and I am still underwater by 40k. The way I look at it is, I could pay my mortgage for the next 5 years and then I would be at break even, Or I could stop paying for a year – save that money, find a nice rental (less than my mortgage by 1k). Save 12k per year for 4 years, then at the end of 5 years, I won’t be in a house I “own” but I will now have 80k (+any other savings) and would be in position to pay cash while the market is still down. What is the downside to this scenario?
Asked on August 22, 2011 Michigan
Answers:
FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney
Answered 12 years ago | Contributor
If you walk away from a home that you own, you face the following unpleasant possibilities and realities assuming the home's loan that you have is purchase money (original loan for its purchase):
1. your credit will have a personal blemish where depending upon its degree, you might be unable to obtain loans to buy a home or buy some item;
2. if the existing loan is "purchase money," meaning used to acquire the property and not a refinanced loan, most likely you would not be subject to any deficiency judgment if the home is foreclosed upon or sold for less than the amount of your loan in that most states have anti-deficiency laws concerning purchase money loans;
3. if the existing loan is not purchase money, you very well could be subject to a deficiency judgment if the home is foreclosed upon where the bid amount is less than what is owing on the loan.
One option is to try and rent out the home for close to what your mortgage is and you rent a place for less than the home's current monthly debt.
Good luck.
IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.