Last year I wrote a post outlining why I think people who haven't lost their income should pay their mortgages regardless if their home values have gone down.
I've seen this topic resurface over the last few weeks. It seems that more and more people and bloggers are leaning towards saying that ‘It's OK'. A lot of this had to do with a financial planner's story of how he went through this with a Las Vegas home.
Since it's been awhile, I thought I'd reconsider it and see if my opinion has changed.
Short answer: It hasn't.
See, Ninja at Punch Debt in the Face wrote how his opinion has changed, largely because he now sees it as the bank and customer entering into a deal, but that people and businesses break deals and end contracts all the time.
If it were that simple, I would be 100% in that corner.
But it's not that simple.
Because it's not just about the bank and the customer. Everybody who walks away from their mortgage impacts much more than that.
If you live in a neighborhood, your walking away affects the value of every single home around you. You're impacting every one of your neighbors. Not to mention that a home that might go empty is at risk of falling into blight, something that can spread quickly.
So, you're impacting all your neighbors.
Most likely, if you stop paying on your mortgage, you stop paying your taxes. That means, everybody that lives in your community is affected by taking in less tax revenue.
So, now you're affecting everybody in your city, including schoolchildren who get less tax revenue.
And it goes further….
The economy hasn't gotten a firm boost in almost five years now. We may no longer be in a recession, but we're certainly not out of the woods or in a growing economy. Much of this has to do with the drag that housing puts on the economy.
So, yes, I am putting it out there that walking away hurts every single person in the country. Maybe even in the world if we want to go that far, since the global economy is here and pretty much every decision is far reaching.
Yes, banks may have ‘started' it by making stupid loans and letting the bubble get created.
I get that.
But, now the banks are done with that. Sub-prime mortgages are a thing of the past. Loans to unworthy customers are pretty much impossible. Yet the problem continues. Why?
Well, it's not the banks right now. The banks have done their part. Whether it was forced on them or not, I don't really care. But, the problem remains now because people, not banks, are continuing to drive the market down with the vicious spiral that walking away creates. And, now it's on the people to stop the madness. Not the banks.
There are options now. You can re-finance at historically low rates. By doing so, you can pay the same amount every month and have your principle payment fall by over twice as much as what you are currently paying. You will be above water that much faster, all while helping stabilize your neighborhood, your community, and the economy as a whole.
So, please, let's think about doing the right thing. If we really allow ourselves to be talked into the notion that walking away is OK, then guess what? We'll still be talking about this for years to come.
Nobody wants that, right?