In these difficult economic times, as many of 31% American homeowners with a mortgage are considered underwater, meaning they are struggling to pay it back. With over a trillion dollars currently owed on houses with mortgages, you aren't alone if you're finding yourself burdened by a house that will take years to be worth enough to make a profit on selling it.
Strategic foreclosure is an increasingly common option due to this market, and between 2009 and 2010, there was an increase of 8% in the number of foreclosures considered “strategic” -- up to nearly a third of foreclosures. If you're considering strategic foreclosure, here are some things you should know before you walk away.
They're an option even if you can pay
Some people think that foreclosure is only for those who are bankrupt and truly unable to pay any of their bills. While this is certainly true, and the majority of foreclosures occur when people lose their jobs or fall behind on paying back debt, it's not always the case. Even if you have the ability to pay, you can choose to walk away if your house value suddenly drops and your mortgage ends up being worth more than your home. If you can't sell and can't get a modification, strategic foreclosure can work for you. This is great news for those who don't want to be financially irresponsible but don't have another choice.
Your credit score won't suffer forever
While people often feel like they will be in financial ruins for years, this isn't necessarily true. If you hire a foreclosure expert or attorney to help, you can get through it without having to go through a lawsuit thanks to a short sale or other legal measures. Your credit score will certainly take a hit, but a few years of consistent payments on all of your bills will help increase it again. If you need a good credit score in order to keep your small business going, borrow for a child's education, or rent a property in your area, however, be careful about handing over the keys too soon.
Some states are no-recourse states
If you live in California, North Carolina, or another no-recourse state, the lender cannot sue you to reclaim the amount owing from other assets. Even if you're living in a recourse state, however, the cost of a lawsuit can be high and the hassle significant enough that some lenders will not sue. Remember that the time period they are allowed to sue you and reclaim this amount may be as long as the next fifteen years.
For some borrowers who are fine with a credit score impact for a few years and don't have other options, strategic foreclosure can be the best decision. Consult with your spouse or partner, family, and financial advisors to figure out whether the value of your home is really worth hanging onto it for years.
Author Bio:
Hayley Russell contributes for SunbirdFX.com - Hayley is a freelance writer and has worked extensively as a trader. To find out more about using Metatrader 5 platform, visit the Sunbird FX website.
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