Before you default on that mortgage, even though what you owe on your home may be more than the house is worth, you may want to reconsider.

We all know about the “subslime” loans, or liar loans as they are sometimes referred to. Most of those have reset and ‘Notices of Default‘ have been filed, or houses have already been foreclosed on. A lot of these were borrowers that should have never been able to get a loan to start with.

Then the next wave hits. The Prime A+ borrower through job losses or other hardships start defaulting. Last but not least, are the borrowers who simply walk away from their home because the debt is so much more than the house is worth now. Many borrowers tried getting loan modifications or a few other tricks under all the new laws that have passed trying to Make Homes Affordable, but all of Obama’s men just couldn’t put the housing market together again. Even though you would think it’s to their advantage, the lenders just are not co-operating the way all the “fixes” had intended.

Now consider this. Right now the interest rates are lower than they have been in decades, since the McCarthy era if you’re old enough to know when that was. Even if you default on your mortgage, you’re going to have to live somewhere, so you’re still going to pay. Now you pay rent instead of toward your own house. Now you’re under a landlord with their rules, probably a rent raise every year, no tax deduction, and you may get a 30 day notice on a landlord’s whim.

If you’re still in good standing with your lender and you’re just thinking about defaulting on your mortgage, why not just refinance it? Interest rates are low enough now you can probably get your house payment down to what you would have to pay in rent somewhere else.

I’m not going to lie to you. In my opinion it’s going to take years for the housing market to recover, but in that time wouldn’t you rather have the tax deductions and perhaps build a little equity for yourself rather than give it all to a landlord? The best place to start is with the lender you have now. They should prefer to refinance your debt than deal with another default. Of course banks never seem to get a gold star for good business sense, but it’s worth a try. Depending on how much “under water” you are, you may need to shop around. The banks should be a little more co-operative on a refinance than on a loan mod or a short sale.

For the next five years you’re going to be living somewhere. Doesn’t it make more sense to keep as much of your money in your own pocket as you can? And if you refinance you don’t have to deal with all the credit ramifications, etc. that come along with a foreclosure.

So, before you default on that mortgage, you may just want to reconsider.

If I may help you with any of your housing needs, feel free to contact me at 408-313-3270