Walking away from your mortgage isn’t risk free
For underwater homeowners who think they’ve found a solution to their predicament–stop paying the mortgage and remain in the house until they are forced out by foreclosure–the consequences of such a decision are not as simple as they may seem.
The short-term advantages of a “strategic default” are tempting. The notion of continuing to pay far more than a house is valued at today, or owing more than you think it will be worth five or even 10 years from now, is enough to prompt many people to walk away.
The foreclosure process can be a long one. In many cases, people who decide to stop paying can reap the benefits of free housing — or in the case of investment homes, a free and clear income stream in the form of rent — for more than a year before they are evicted from the property.