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There was an interesting opinion piece over in the Wall Street Journal about when walking away from a home is a good idea. Here is the short version: The author recommends that anyone who is more than 25% underwater on their property should consider walking away. You can be the judge yourself.

Here are some bits from the piece as well:

Stop trying to chase your lost equity. That money is gone. Don’t think like the gambler who blows more and more cash trying to win back his losses. That’s how a lot of people turn a small loss into a big one.

And do the math. Even if you hope the real estate market is near the bottom — it’s possible, but by no means certain — it may still take years to see any meaningful recovery. If you are 25% underwater, your home will have to rise by 33% just to get you back to even.

Is that likely? And over what time period? Even if home prices rose by 5% a year from here, that would still take six years. And during that time you could instead be building fresh savings elsewhere.

People who are underwater on their mortgage normally can’t refinance to a better rate. The main exception to this is people with FHA loans can streamline those loans down to better rates.

Comments Off on On walking away from a mortgage Posted by G.R.A. Admin on Friday, February 26th, 2010


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