Many people, especially in California, are facing the difficult possibility of walking away from their houses. I talk to people every day who are trying to make huge mortgage payments that they can no longer afford. So, what goes in to deciding to give up the house?
First, it’s important to recognize that your house does not define you. There is a great article on Money Health Central today about the idea that your home and house are not the same thing. While the topic is usually emotional, looking at the situation from the standpoint that you can create a home wherever you live may help.
Second,developing a realistic budget to figure out whether you can afford to keep paying on the mortgage. Much has been said about loan modifications in the news, but what gets left unsaid is that those mortgages are now being extended to 40 years and/or requiring a balloon payment at the end. If you are 40 years old, do you envision yourself living in the house for the next 40 years and finally having a paid off home at the age of 80?
Third, many are concerned that they will not be able to buy another house ever again. It is possible that not buying a house is a great option. You’ll need to look at the cost of renting versus the cost of a mortgage, taxes, insurance, and home upkeep. In addition, it is possible to buy within a few years of a foreclosure and/or bankruptcy. Saving up a significant downpayment and living within your means are important steps to buying again.
What I hear frequently is that someone wants to keep the house because it is their home and they have sunk so much money into it. However, sometimes it is better to walk away from a bad investment than to continue paying interest-only on a house that is worth far less than you owe on it.
This is just a basic overview and is not legal advice specific to your situation. If you are considering bankruptcy or are facing foreclosure, you should speak with an attorney in your area for legal advice. To speak with me regarding your situation, please email me at jen@jenleelaw.com or call 925-586-6738
