“Strategic default” is a topic a lot of real estate experts are talking about these days. Some Minnesota property owners are so underwater with their mortgage that they are walking away from their obligations and choosing instead to default and give the home back to the bank. With falling property values and difficult economic times, walking away might be a homeowner’s best option, though one not to be entered into lightly.
Many homeowners are underwater on their mortgages. Most of these homeowners did not take out a bad mortgage nor did they buy a home beyond their means. However, with the number of other homes being lost to foreclosure and the decline in property values in general due to the poor economy, many homeowners have found that despite doing nothing wrong and making all of their payments, they are paying much more for a home than it is worth. These homeowners are frustrated. The choices are to try to get a modification from their lender, let the home go to foreclosure, continue to pay, try to do a short sale, or turn the keys in and walk away from the home.
If you are considering walking away from your mortgage in favor of renting, there are several steps a homeowner should take.
- First, homeowners should speak with a mortgage counselor that can explain the options available to them. HUD has free counseling services for homeowners available.
- Second, homeowners should talk to their lender. A lender may or may not be willing to work with a homeowner but it never hurts to ask. Banks are making modifications and most would prefer not to have to go to trouble and cost to foreclose. Start with calling the lender and trying to do a workout.
- Third, understand your rights and obligations under Minnesota law. Talking to a real estate attorney can help you understand your rights and obligations. Walking away from your mortgage will negatively impact your credit score and be reported on your credit report. This can impact your ability to get loans and even to qualify to rent another place to live or purchase a home in the future.
Choosing to walk away from your mortgage is not a decision to be entered into without a lot of thought. A Minnesota Real Estate Attorney can assist you in making this difficult decision and talk about the financial costs, tax consequences, and legal risks of walking away. Call today to discuss your options.