Making The Choice Between Walking Away of Hanging on to Your Underwater Mortgage

For many home owners the past year has kept them awake at nights wondering about their future in their current homes. Home owners with underwater mortgages are in a tough place these days; with a long climb back out of the recession and more economic uncertainty likely in the near future, it is hard to know at which point you are better off holding on to a home that is worth far more than you owe on it and at which point you're better off walking away from it.

There are really two sides to the argument that comes up over walking away from these types of mortgages; stay and ride it out, or walk away and start over. There are many voices on both sides of this argument, both with valid points.

On the “stay and ride it out” side of the argument there are those who say that due to the recovering economy it is worthwhile staying in your home while home prices increase over the next few years so that if you choose to sell it eventually, you can recoup more of your investment. These proponents also suggest that you refinance your mortgage if possible to take advantage of the lower interest rates still available; if you think that with a good plan in place that you can stay in your home for many years, then opt for a 15 or 30 year mortgage with a stable rate instead of an adjustable rate mortgage. Another option is also seeing if you qualify to have your mortgage modified through government programs; while these modifications have proven rather difficult to obtain so don't bet on being able to attain this.

The other side of the argument on this issue is from those who advise that if your home is worth far less than you owe on it and are struggling to make payments that the best thing for you to do is to walk away from it or just keep living in it without making mortgage payments until the bank evicts you. The downfall to this strategy is that it can be a very shaming experience and it will negatively affect your credit score. However, it may take you less time to recover from walking away from a home in this kind of circumstance than if you stayed in the home and tried to ride out the economy.

Whichever option that you choose, be sure to weigh the options that will work best for you in your own situation.

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