As more and more homeowners are going into default, it appears more and more are just walking away from their mortgage.
TEAM AGUILAR DISCLAIMER: Let me state that Team Aguilar or myself are not instructing anyone to walk away from their mortgage and ultimately the one that has to make that decision is you. VIEW THIS CALCULATOR AT YOUR OWN RISK!
There is a new calculator, may not be new to you but it’s new to me and I want to introduce it here. It may help people determine if it makes sense to walk away. The calculator is on the website, www.YouWalkAway.com, here is the calculator.
Once you go through and start punching in the numbers it really gets you thinking. As an example I used a very typical scenario that seems very common here in San Diego.
I started by entering a home value of $300,000 with a 1st loan balance of $420,000 and a 2ND mortgage of $80,000. This is fairly common here in Southern California. Many people purchased a $500,000 home with 100% financing using an interest only loan that is NOW worth $300,000 in today’s market. After punching in all the numbers and using a rate of appreciation of 4% which I think is a very fair historical national average it would take approximately 16 years to get back to the break even point. The walk away monthly savings is approximately $700 a month along with a “Walk Away Cash Savings” of over $100,000.
What’s the bottom line? Well if you only planned on staying in your home for a few years to begin with, less then 10 it may make sense to walk away. If you know you are going to live in this home forever and be buried in the back yard then it’s likely that you will be just fine. It’s similar to your retirement account that are in the dumps right now with this market. If your close to retirement you may be in trouble but if you have time and years are on your side you will have to time to recover.
Voluntary defaults happen to be a brand new phenomenon in our society. With the recent collapse in housing, estimates show that as many as ten million families may currently be underwater on their mortgage.
UPDATE: So there seems to be some question about the You Walk Away organization. LET ME SAY that I know nothing about their services or service. I don’t know anything other then what I have read online on some different forums, blogs and message boards. I have no idea what value if any they can offer. I know that the mortgage calculator is unique and it may help you decide what to do. It’s fairly simple and you can create one of your own fairly easily. The bottom line is that you need to look at all of your options and decide what is best for you. Don’t rely on someone else or some organization to do this for you. You should take all the information you can gather, all the options available to you and decide what the best option is for YOU!
Also, a little rant and rave! Another issue really bothering me, LOAN MODIFICATION SCAMS. There are thousands of legal services offering loan modification services right now here in California and I am sure in many other states. The California state BAR is investigating hundreds of them right now. All of the services being offered by these companies are things that you can do on your own. It just requires a little bit of your time. Save your money, I can’t tell you how many times I talk to someone that forked over thousands of dollars just to have their home go to foreclosure with the modification company not doing one thing. I recently spoke with someone that contacted their lender just a few days before their foreclosure trustee’s sale only to find out that the lender had NO RECORD of the loan modification company ever contacting them.