I’ve had this title “Loss of Honor, Walking Away From Your Mortgage” stored in draft mode for over a month. I hesitated in writing it because I was torn between how the government was treating us (practically giving money way to first time home buyers) and that fact that to walk away from your mortgage is wrong.
Why is it wrong you say?
Because you entered a contract with the other entity. A contract is a contract and without it, American isn’t quite the same place. What if your house lost 40% of it value, you might ask? Well, I think that bites, but you still have a contract with your lender. And the right thing to do would be to continue to make your payment as planned. Besides, there is a good chance that your house might get some of it’s value back. From recent readings, house prices are starting to appreciate a bit.
As you can tell, I’m up on the old soapbox about this voicing my opinion, but I kind of feel like a hypocrite! I now own my house outright, so I no long have a mortgage payment, but that’s not why I feel like a hypocrite!
You see a very close friend has just did exactly what I’m saying not to do… He bought a bigger, better house, and walked away from the mortgage on the other house. He didn’t tell me directly, but his dad was upset and let it leak out to me. Needless to say, I was shocked!
Such an action that my friend preformed is called a “Strategic Default“. This is where a person can still afford to pay a mortgage, but instead walks away.
My view of my friend has already changed for the worse, I find that I don’t want to hang out with him, and make up excuses as to why we can’t hang out.
I hope that Strategic Defaulters realize that doing such a deed, will tarnish their image, and they may even lose friends, or have their friendships reduced (like I did).
What would you do if a close friend or relative did such an action?
-MR
I feel the same way that you do, and very strongly so. We do have a friend that did this. I still mention it but we haven’t stopped being friends with them. Their case was a little different. The area that they lived in was close to the ‘wrong side of the tracks’ when they bought but still very nice. After the market started to slump, though, their neighborhood saw crime and blight go up dramatically. They also wanted to start a family and knew that the declining neighborhood simply wasn’t safe for them or a baby. They had the house listed for a year, dropping the price many times. They finally gave the house back to the bank and moved to a safer neighborhood that wasn’t at risk to fall into blight. While I still don’t respect the decision, I guess in their case I can understand it and I don’t think that they really came out ‘ahead’ like it sounds your friend was trying to do.
@MoneyBeagle
You friend’s case sounds a little better, but still a contract is a contract… At least they had a valid reason for moving other than taking advantage of the system.
My friend blatantly took advantage of the system, and at one of the worst times…
Oh well, with my friend, I now question his integrity, and how much I can trust him…
Money Reasons – how great you already own your home. I have to say I am envious! I am pretty far away from reaching that dream, about 7 more years.
You are so right about the ethics of signing a contract. I want someone to pay me for my Adobe stock that went in the dumpster after Steve Jobs starting saying negative things about Flash. Maybe Jobs personally should be reimbursing me.
I totally get you wanting to avoid your friend. When I lose respect for someone, I just can’t be with them. It would be different if it were for medical reasons or something, but he is just taking advantage of something when instead he should be paying for his own stupidity.
@Everyday Tips
Yep, we just paid the mortgage off this past February. I’m kind of floundering about trying to decide how to invest the money from the payments… Surprisingly, it’s causing me more anxiety that I imagined, especially in this crazy economy.
My friend and his wife make less than me, but are always spending much more than I do. They have already declared bankruptcy once already. Amazing how they get away with it…
I have a similar post going up next Tuesday that I’ve also been holding off on for months…it’s my personal opinion on people who declare bankruptcy to get out of consumer debts…
Anyway, let’s just say that I 100% agree, lol. I also wouldn’t be able to continue the friendship since I only want to be friends with people I respect and can trust.
I’m an understanding person when it comes to friends and always try to see their side of something while forming my opinion about a situation, but this seems obviously wrong.
@Budgeting in the Fun Stuff
We are still friends, but I shove the friendship out to a much lower level. Trust is important in friendship, and walking away from his mortgage doesn’t make me trust him, especially with money matters.
If his car breaks down and he needs me to come and rescue him, I’ll come… But I won’t be lending him any money, that’s for sure 🙂
@Bucksome Boomer
Yeah, I have to much history with my friend to totally drop him, but I definitely don’t feel as comfortable around him. Especially when he complains about money…
LOL, I’m actually trying to convince my family to buy a little bigger house, but so far, my son and wife are resisting. My 6 year old daughter was up for the move though, but she might have changed her mind since she has a new friend in the neighborhood.
If I do get a new house, I don’t know if I’d be so quick to pay it off with the mortgage rates so low… but maybe 🙂
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I think you should invest your spare money in my blog. (ha ha!)
Seriously though, have you consider buying a rental property? Maybe dividend stocks? What a fun anxiety to have. It is true though, good news and bad news can both cause stress!
@Everyday Tips
With the way you write, investing in your blog would pay off big! Great work, you won me over as a reader right quick! Nice job!
I’ve been focusing on stock dividends (I actually own a few as part of a Lunch experiment that I’m doing). But I’m also considering investing in rental property too. Now may be the best time to consider doing so… I wish I had a bit more money for that endeavor though!
Hopefully, soon I’ll break free from the funk that I am in…