Although walking away from your mortgage may be difficult to imagine, foreclosure may be your only option if you’re in a tough financial situation. Doing so is oftentimes referred to as a strategic default – and, if done in the proper manner, along with the help of an experienced lawyer, then it could also be the right choice for those who owe much more than their property is worth.
Through a strategic default, a homeowner essentially chooses to walk away from his or her mortgage. The first step in this process is to make the decision to stop making their mortgage payments.
Before you cease with your mortgage payments, however, it is always best to consult with an lawyer who is well versed in these matters, in terms of how and when you should take action. This is because there can be certain ramifications – some of which can be even worse than the foreclosure itself.
For instance, if a homeowner simply stops making their mortgage payments, the lender will have the right to move forward with foreclosure proceedings. This means that the lender can force the property to be sold a foreclosure auction. However, the lender can also come after the homeowner for a deficiency judgment. This is the amount of money that the homeowner was “upside down” on the loan.
As an example, if a homeowner owes $200,000 on their mortgage, but the home is only valued at $150,000, then he or she could be at risk for the lender coming after them for the $50,000 difference.
Even if the lender does not come after you immediately following the foreclosure, you may not be off the hook from a deficiency judgment, as the lender could opt to pursue you at a later date in the future.
Even though there are certain programs available to homeowners today such as short sales, loan modifications, or deed in lieu of foreclosure, sometimes moving forward with a full foreclosure is still the best strategy – even if your creditors are close at hand.
For additional information on your best options – as well as the potential advantages and drawbacks of each – contact us. We can walk you through what you can expect from each potential situation.