Don’t Just Walk Away From A Mortgage

Is it morally wrong to abandon a home loan? You'll get solid, enthusiastic replies on both sides of the question. Some will contend that when you make a financial agreement with another entity, you're committed to stick to it to the best of your capacity. Others might argue that banks recognize what they're getting into with a home loan and that abandonment is a danger they assume whenever in the agreement, so you're simply doing something inside of the limits of the understanding. Besides that ethical concern, however, is it truly a decent financial decision? Firstly, leaving a home loan will drop your FICO score by 150 points or more and it will take quite a long time to recoup. Such a drop has a much smaller effect if your credit is already in poor shape but it can be a tremendous effect if your credit is great. What sort of effect? It will turn out to be staggeringly hard to get an auto loan or another home loan with any kind of competitive interest rate. Loan specialists will take a glance at your FICO rating and if your score is low, they won't offer you a better loan—if they decide to give you one at all. You need to acknowledge that you'll either be paying for cars and homes in cash money for more than a few years or will be taking out loans with enormous rates and down payments. Another effect is the extraordinary number of other services that use your credit rating to figure out what to charge you and whether to work with you. Insurance is just one example of this – most insurance agencies routinely do a "soft pull" of your credit and utilize declining credit as motivation to raise your rates. Several upscale tenants will do the same and not lease to individuals with poor credit, which may drastically limit your renting options unless you get quality housing relocation assistance from professionals. Potential employers also frequently pull your credit report and use it as a major determining factor in their hiring decisions. These are all serious costs added to the complication of walking willingly into foreclosure. The best option, despite what you may have heard, is to talk with the bank. Explain your circumstance and talk about alternatives to foreclosure. It is sometimes easier for a lender to justify refinancing you than it is to put your property in foreclosure. Oftentimes, banks are more concerned with renegotiating instead of tackling more abandoned homes, so it may be a more reliable alternative. You might be surprised to find that staying put is the best option, even if you happen to be underwater in your mortgage. To speak with FAIR about your options in mortgage assistance and debt recovery contact a counselor now.