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What You Should Know Before, During, and After a Mortgage Default

Mortgage in San DiegoData from Experian’s Decision Analytics Group shows an average mortgage balance of $157,154. That’s more or less how much the typical American household owes on a mortgage. In comparison, the average household income is a mere $52,000, according to the U.S. Census Bureau. Those who earn as much or less are at the bottom 48 percent of the bracket.

Other debt like credit cards and student loans aren’t even in the equation. What this means is that the typical American household owns much more than it can come up with. As a result, many homeowners choose to default and try everything they can to ease the transition. But then, what happens before, during, and after walking away from mortgage payments? Mortgage-San-Diego may know the answer.

Financial Pileups And ‘Opportunities’

Walking away from your mortgage can make the final cost even greater. You’ll be charged a myriad of additional fees (i.e. late fees and other related expenses). These fees can easily add hundreds or thousands of dollars to your bill. Not to mention you’ll also damage your credit score. Should you decide to apply for a new loan in the future, good luck trying to find a willing lender.

All of this leads to the inevitable foreclosure. Several defaulters, however, see a hint of opportunity in this. The past few years saw folk waiting for a really long time before foreclosure reviews are out. This resulted in about 40 percent of defaulters actually living in their homes for a few years’ more without worrying about payments. How do they manage to delay it? Filing for bankruptcy, hitting lenders with further documentation requests, and deliberately pushing back short sale dates, to name a few.

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Is It Good To Walk Away?

Trent Hamm of TheSimpleDollar.com has an interesting take on this question. His short answer is that, yes, defaulting on a mortgage is highly unethical. Such a move makes the credit score penalty justified in many ways. A mortgage is like any other lending/borrowing endeavor: it’s based on the assumption of good faith. The lender and the borrower agreed to terms that’ll help the deal move forward. Opting out of it is simply wrong.

But there would still be times wherein defaulting makes sense. Researchers from the New York Federal Reserve claim that it’s a good move if home values dip. For some, it helped keep other potentially problematic debt problems at bay… for a time.

It’s still not recommended to default on a mortgage, though. Keep that in mind all the time.

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