Raising Farrahzona did everything right, but is now way upside down on her mortage. She’s wondering if it wouldn’t be better to just walk away. A lot of people are in this situation right now.
I would have a hard time walking away, even if I could accept that I’d be financially better off. Just because something would seem vaguely wrong about sticking the bank with my problem. But really, there are two people who take a risk when property is purchased with a mortage. You, and the bank. The bank has every incentive to keep a homeowner in their house. If they walk away, the bank is stuck selling the property at a significant loss. The bank might we willing to negotiate, and I think I would try to come to an agreement with my bank before walking away.
My home value has been falling as well. I purchased in 2004. The value is still higher than what I paid for it, but a few more months of this and I’ll be at the price I paid for the house. Because I put 10% down, and have another 10% in a seperate home equity loan, It’ll be a while before I’m actually underwater. I have the cash to pay off the equity loan if the bank demands it because of falling prices. I’m in a far better position than a lot of folks, but Pennsylvania hasn’t gotten soaked as much by falling prices as other places.