# Need lowdown on walking away from mortgage or short sale **URL:** \ **Category:** In My Humble Opinion\ **Created:** [February 5, 2019, 10:52pm UTC](https://boards.straightdope.com/t/need-lowdown-on-walking-away-from-mortgage-or-short-sale/829033 "2019-02-05T22:52:59Z")\ **Posts on this page:** 20\ **Page:** 2
**Author:** ![Beckdawrek](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/beckdawrek/32/3647_2.png) [@Beckdawrek](https://boards.straightdope.com/u/Beckdawrek)\ **Post date:** [February 6, 2019, 5:58am UTC](https://boards.straightdope.com/t/need-lowdown-on-walking-away-from-mortgage-or-short-sale/829033/21 "2019-02-06T05:58:56Z")
A lot of people who rent feel just that. That they are on an endless treadmill. At least if you’re paying a mortgage you’re getting closer to the end game every month. We paid our mortgage off a few years ago. Happiest day ever. We thought about 2nd mortgages a few times when our finances were tight but we never took the plunge. It just seemed like spinning your wheels. ---
**Author:** ![Hilarity\_N.Suze](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/hilarity_n.suze/32/6223_2.png) [@Hilarity\_N.Suze](https://boards.straightdope.com/u/Hilarity_N.Suze)\ **Post date:** [February 6, 2019, 9:14am UTC](https://boards.straightdope.com/t/need-lowdown-on-walking-away-from-mortgage-or-short-sale/829033/22 "2019-02-06T09:14:07Z")
Not recent experience. The husband of a friend of mine did this. It hosed his credit rating so badly that they waited five years to get married so her credit rating wouldn’t also suffer. Then there were a couple of years of austerity when they couldn’t get any credit, at all. They had to rent a place in her name and pretend he didn’t exist. This happened years ago, he was one of the air traffic controllers Reagan fired. So that’s the time frame. I don’t remember if there was a recession around there or not. He took another lowpaying job because he stubbornly believed he would be rehired. Didn’t happen. I think actually he did something that gave the house back to the bank, or turned it over, but I’m not positive. He had a second and he had to pay that off, but it wasn’t really that significant. I’m thinking around $5000. Nearly 20 years later, 2000 or thereabouts, when he went to buy another house, he still had to put on his mortgage application that he’d had a foreclosure or relinquishment. I have no idea how much this affected his interest rate. He was pretty bitter that he had to put this on there like it’s his permanent record. He thought it was going to be seven years and gone. You might want to check with a lawyer. This is probably not something you want on your permanent record. Bad credit gives you higher auto insurance rates, makes it harder to rent, and might affect your employment success in certain careers. ---
**Author:** ![pullin](https://avatars.discourse-cdn.com/v4/letter/p/c57346/32.png) [@pullin](https://boards.straightdope.com/u/pullin)\ **Post date:** [February 6, 2019, 10:25am UTC](https://boards.straightdope.com/t/need-lowdown-on-walking-away-from-mortgage-or-short-sale/829033/23 "2019-02-06T10:25:46Z")
> [@diggerwam](#): > > Are there any other options that I’m unaware of? Renting out a room or moving and renting the whole house is not something we have much interest in. Why not? I’m curious why this option won’t work. If you’re moving to a (presumably) smaller and cheaper apartment, getting most of the mortgage covered by renters seems like the best option. I don’t know the specifics in your case, but once you move into the apartment and allow the bank to take a flamethrower to your credit rating(s), you’ll be stuck. This will affect your ability to get another apartment, negotiate another lease, and could prevent you from changing jobs. ISTM the trapped feeling you have under the house now might be better than the trapped feeling of living under a destroyed credit rating. Again, I’m guessing without a lot of fact here, so this might not be accurate. Best of luck to you though. ---
**Author:** ![diggerwam](https://avatars.discourse-cdn.com/v4/letter/d/919ad9/32.png) [@diggerwam](https://boards.straightdope.com/u/diggerwam)\ **Post date:** [February 6, 2019, 11:14am UTC](https://boards.straightdope.com/t/need-lowdown-on-walking-away-from-mortgage-or-short-sale/829033/24 "2019-02-06T11:14:40Z")
Both mortgages plus property tax is $1075. I can get apartment 950-1000. I suppose I could rent this place out, but I’m still on the hook for upkeep. To be clear, we just get nothing out of owning the house. No enjoyment, no flexibility, it’s just a drag on us. We could be here for another decade and principal owed will still be greater than amount we can sell it for. There was a time in our life where owning a house made sense, but those days are gone. We simply don’t need this, and we want to move on. ---
**Author:** ![kanicbird](https://avatars.discourse-cdn.com/v4/letter/k/5f8ce5/32.png) [@kanicbird](https://boards.straightdope.com/u/kanicbird)\ **Post date:** [February 6, 2019, 12:28pm UTC](https://boards.straightdope.com/t/need-lowdown-on-walking-away-from-mortgage-or-short-sale/829033/25 "2019-02-06T12:28:59Z")
> [@UCBearcats](#): > > Sorry that the OP doesn’t want to live up to their end of the contract and stick a bank with a loss for no other reason than they are “tired” of the house. The OP is asking about playing by the rules of the game. There is no personal honor at stake, that was replaced by a contract which already accounts for such contingency, risk assumed by the lender. If it was a gentleman’s agreement then there would be such concerns. So ‘not living up to the contract’ is allowed in the contract, thus they are living up to the contract. All and all fair dinkum. ---
**Author:** ![diggerwam](https://avatars.discourse-cdn.com/v4/letter/d/919ad9/32.png) [@diggerwam](https://boards.straightdope.com/u/diggerwam)\ **Post date:** [February 6, 2019, 12:37pm UTC](https://boards.straightdope.com/t/need-lowdown-on-walking-away-from-mortgage-or-short-sale/829033/26 "2019-02-06T12:37:33Z")
I’m wondering if a professional letter to the bank wouldn’t be helpful. 20 yrs of mortgages accross 2 homes. 95% of our payment went to interest. We’ve improved the house, new furnace, a/c and roof. Just see what they say. Worst result is they tell us to suck it. ---
**Author:** ![Isosleepy](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/isosleepy/32/479_2.png) [@Isosleepy](https://boards.straightdope.com/u/Isosleepy)\ **Post date:** [February 6, 2019, 12:41pm UTC](https://boards.straightdope.com/t/need-lowdown-on-walking-away-from-mortgage-or-short-sale/829033/27 "2019-02-06T12:41:18Z")
If you can refinance at 4%, your payments and tax would be about 900. It would at least help a little. You may not be able to because of the LTV ratio, but it is worth a try. You are not getting what is commonly expected out of homeownership: building equity. But if you abandon the house and rent, you won’t get that either. And since your house was at one point worth enough to secure that mortgage, it may be again at some point. So while you don’t see equity building now, it is not a zero probability in the longer run. Without building equity, you are in effect in a situation similar to renting your house from the bank at a cost of payment +tax, with the onus of maintenance on you. So the equation for you is: does not having to do the maintenance, and living in an apartment you like better, outweigh the consequences of foreclosure? Those consequences vary greatly by location and can vary by individual situation, meaning it is important to get knowledgeable advice specific to you: like a lawyer specializing in foreclosure. The consequences are not zero. There is no magic do-over, unfortunately. As to the second mortgage, if you want to continue paying that after the foreclosure, I’m sure they will be happy to talk to you about changing it to unsecured credit once it is clear what you plan to do/have abandoned the house. The question is why? Not defaulting on the 2nd mortgage is not going to appreciably lessen the massive ding from foreclosure. ---
**Author:** ![Eva\_Luna](https://avatars.discourse-cdn.com/v4/letter/e/e495f1/32.png) [@Eva\_Luna](https://boards.straightdope.com/u/Eva_Luna)\ **Post date:** [February 6, 2019, 12:41pm UTC](https://boards.straightdope.com/t/need-lowdown-on-walking-away-from-mortgage-or-short-sale/829033/28 "2019-02-06T12:41:23Z")
> [@diggerwam](#): > > I don’t analyze the bill but my county is top ten highest property taxes in the country. If your house is worth 80k and your property taxes are that high, why don’t you appeal your tax assessment? ---
**Author:** ![SamuelA](https://avatars.discourse-cdn.com/v4/letter/s/c77e96/32.png) [@SamuelA](https://boards.straightdope.com/u/SamuelA)\ **Post date:** [February 6, 2019, 1:05pm UTC](https://boards.straightdope.com/t/need-lowdown-on-walking-away-from-mortgage-or-short-sale/829033/29 "2019-02-06T13:05:41Z")
> [@Hilarity\_N.Suze](#): > > Nearly 20 years later, 2000 or thereabouts, when he went to buy another house, he still had to put on his mortgage application that he’d had a foreclosure or relinquishment. I have no idea how much this affected his interest rate. He was pretty bitter that he had to put this on there like it’s his permanent record. He thought it was going to be seven years and gone. > > You might want to check with a lawyer. This is probably not something you want on your permanent record. Bad credit gives you higher auto insurance rates, makes it harder to rent, and might affect your employment success in certain careers. If the information is removed from any file the mortgage underwriter can legally access in 7 years, I’m not sure how they can force you to answer this question in this way. ---
**Author:** ![Cheesesteak](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/cheesesteak/32/3694_2.png) [@Cheesesteak](https://boards.straightdope.com/u/Cheesesteak)\ **Post date:** [February 6, 2019, 1:08pm UTC](https://boards.straightdope.com/t/need-lowdown-on-walking-away-from-mortgage-or-short-sale/829033/30 "2019-02-06T13:08:57Z")
> [@UCBearcats](#): > > Sorry that the OP doesn’t want to live up to their end of the contract and stick a bank with a loss for no other reason than they are “tired” of the house. It’s not the OPs job to prevent the bank from taking a loss. The OP has also been paying the bank interest for 12 years, and they potentially stand to lose 20 grand when they walk away. Shit, they probably paid the bank over $100,000 in interest payments already. I’m thinking this loan, as a whole, is not a loss. I’ll also point out that the bank openly and willingly approved a loan secured by an inadequate asset. If they actually have to eat a loss as a result, it’s their own damn fault. For the OP, it should be known that Illinois looks to be a “recourse state” where the lender can sue you for the remaining balance of the loan. It’s going to be best to work out your disentanglement with the lender. If you walk away and dump it on them, chances are they’ll fuck up the house, sell it for $40k, and sue you for the remaining 60. ---
**Author:** ![kanicbird](https://avatars.discourse-cdn.com/v4/letter/k/5f8ce5/32.png) [@kanicbird](https://boards.straightdope.com/u/kanicbird)\ **Post date:** [February 6, 2019, 3:05pm UTC](https://boards.straightdope.com/t/need-lowdown-on-walking-away-from-mortgage-or-short-sale/829033/31 "2019-02-06T15:05:34Z")
> [@Cheesesteak](#): > > … > > For the OP, it should be known that Illinois looks to be a “recourse state” where the lender can sue you for the remaining balance of the loan. It’s going to be best to work out your disentanglement with the lender. If you walk away and dump it on them, chances are they’ll fuck up the house, sell it for $40k, and sue you for the remaining 60. Yes if the bank gets control over the house, after fees and having it vacant, you can expect them not to get much, and be looking for more from you. If the lender will come after you, it would be in general better for you to sell it then for the bank to sell it as foreclosed or auction, a lot of value is lost when sold that way. ---
**Author:** ![Really\_Not\_All\_That\_Bright](https://avatars.discourse-cdn.com/v4/letter/r/e8c25b/32.png) [@Really\_Not\_All\_That\_Bright](https://boards.straightdope.com/u/Really_Not_All_That_Bright)\ **Post date:** [February 6, 2019, 3:38pm UTC](https://boards.straightdope.com/t/need-lowdown-on-walking-away-from-mortgage-or-short-sale/829033/32 "2019-02-06T15:38:53Z")
Talk to a lawyer. Walking away from your mortgages will have consequences which are much worse than continuing to pay on the house (even as a rental). First, in most states (not sure about yours) you’ll owe the balance of the mortgage less whatever the bank recovers in the foreclosure sale. You may also owe the balance of the second mortgage (in some states, the foreclosure sale buyer takes the home subject to the second mortgage, but not all). _If the mortgage balances are forgiven, it will count as taxable income to you for that tax year._ ---
**Author:** ![wguy123](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/wguy123/32/3161_2.png) [@wguy123](https://boards.straightdope.com/u/wguy123)\ **Post date:** [February 6, 2019, 4:02pm UTC](https://boards.straightdope.com/t/need-lowdown-on-walking-away-from-mortgage-or-short-sale/829033/33 "2019-02-06T16:02:13Z")
Is the Chicago housing market doing that poorly? In the NW, the houses have far rebounded above the pre-2008 crash prices. Of course, I’m also shocked at the thought of a house for $80,000. That gets you a double-wide around these parts. ---
**Author:** ![AlsoNamedBort](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/alsonamedbort/32/3213_2.png) [@AlsoNamedBort](https://boards.straightdope.com/u/AlsoNamedBort)\ **Post date:** [February 6, 2019, 4:03pm UTC](https://boards.straightdope.com/t/need-lowdown-on-walking-away-from-mortgage-or-short-sale/829033/34 "2019-02-06T16:03:03Z")
> [@Hilarity\_N.Suze](#): > > Nearly 20 years later, 2000 or thereabouts, when he went to buy another house, he still had to put on his mortgage application that he’d had a foreclosure or relinquishment. I have no idea how much this affected his interest rate. He was pretty bitter that he had to put this on there like it’s his permanent record. He thought it was going to be seven years and gone. > [@SamuelA](#): > > If the information is removed from any file the mortgage underwriter can legally access in 7 years, I’m not sure how they can force you to answer this question in this way. Not sure if it’s changed since 2000 or he read it wrong, but the Uniform Mortgage Loan Application now only asks if you’ve had a foreclosure in the last 7 years. And it’s pretty much an approved/denied situation. Outside of the impact to your credit score, the foreclosure won’t have any separate impact on your interest rate. ---
**Author:** ![AlsoNamedBort](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/alsonamedbort/32/3213_2.png) [@AlsoNamedBort](https://boards.straightdope.com/u/AlsoNamedBort)\ **Post date:** [February 6, 2019, 4:07pm UTC](https://boards.straightdope.com/t/need-lowdown-on-walking-away-from-mortgage-or-short-sale/829033/35 "2019-02-06T16:07:58Z")
> [@wguy123](#): > > Is the Chicago housing market doing that poorly? In the NW, the houses have far rebounded above the pre-2008 crash prices. Of course, I’m also shocked at the thought of a house for $80,000. That gets you a double-wide around these parts. Curious about this too. I checked out Zillow. Assuming, it’s a house and not condo, you aren’t getting a house for 80K anywhere on the north side. ---
**Author:** ![Really\_Not\_All\_That\_Bright](https://avatars.discourse-cdn.com/v4/letter/r/e8c25b/32.png) [@Really\_Not\_All\_That\_Bright](https://boards.straightdope.com/u/Really_Not_All_That_Bright)\ **Post date:** [February 6, 2019, 4:10pm UTC](https://boards.straightdope.com/t/need-lowdown-on-walking-away-from-mortgage-or-short-sale/829033/36 "2019-02-06T16:10:30Z")
> [@wguy123](#): > > Is the Chicago housing market doing that poorly? In the NW, the houses have far rebounded above the pre-2008 crash prices. Of course, I’m also shocked at the thought of a house for $80,000. That gets you a double-wide around these parts. I wondered about that as well. Our house in the Florida 'burbs went from ~$180K in 2008 (when we bought, after the market started dropping but before the crash) to ~$120K (at the bottom of the Great Recession) and is now somewhere in the low 200s. ---
**Author:** ![Dewey\_Finn](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dewey_finn/32/4222_2.png) [@Dewey\_Finn](https://boards.straightdope.com/u/Dewey_Finn)\ **Post date:** [February 6, 2019, 4:13pm UTC](https://boards.straightdope.com/t/need-lowdown-on-walking-away-from-mortgage-or-short-sale/829033/37 "2019-02-06T16:13:21Z")
> [@diggerwam](#): > > Both mortgages plus property tax is $1075. I can get apartment 950-1000. I suppose I could rent this place out, but I’m still on the hook for upkeep. To be clear, we just get nothing out of owning the house. No enjoyment, no flexibility, it’s just a drag on us. We could be here for another decade and principal owed will still be greater than amount we can sell it for. There was a time in our life where owning a house made sense, but those days are gone. We simply don’t need this, and we want to move on. I’m a renter because I live in a really high-cost area and buying a house isn’t in my budget, but in your circumstances, I would reconsider. The rents may be similar now, but they will increase over time. Meanwhile, your mortgage is fixed (or perhaps might even go down, if you refinance or seek assistance with it). And as suggested, talk to the town about a property tax reduction, if possible. The rational choice might be to stay where you are. Edited to add, that the mortgage plus property tax might be $1,075, but the interest and tax are deductible. So what is the net cost? ---
**Author:** ![Dewey\_Finn](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dewey_finn/32/4222_2.png) [@Dewey\_Finn](https://boards.straightdope.com/u/Dewey_Finn)\ **Post date:** [February 6, 2019, 4:22pm UTC](https://boards.straightdope.com/t/need-lowdown-on-walking-away-from-mortgage-or-short-sale/829033/38 "2019-02-06T16:22:42Z")
Also, moving is going to cost something, perhaps thousands? And breaking the mortgage might require you to hire an attorney. ---
**Author:** ![diggerwam](https://avatars.discourse-cdn.com/v4/letter/d/919ad9/32.png) [@diggerwam](https://boards.straightdope.com/u/diggerwam)\ **Post date:** [February 6, 2019, 4:43pm UTC](https://boards.straightdope.com/t/need-lowdown-on-walking-away-from-mortgage-or-short-sale/829033/39 "2019-02-06T16:43:25Z")
Rockford, IL, not Chicago. I appreciate the advice. Rethinking walking away, but still might talk to lender about short sale and some kind of forgiveness of the difference. We’ve had almost 20 yrs of mortgage payments thru this lender. I agree, they have already made a bundle off of us. ---
**Author:** ![drachillix](https://avatars.discourse-cdn.com/v4/letter/d/48db29/32.png) [@drachillix](https://boards.straightdope.com/u/drachillix)\ **Post date:** [February 6, 2019, 5:03pm UTC](https://boards.straightdope.com/t/need-lowdown-on-walking-away-from-mortgage-or-short-sale/829033/40 "2019-02-06T17:03:06Z")
My only input is, watch for tax implications. I had a foreclosure about 10 years ago. The house sold for significantly less than what was owed on the mortgage. The discharge of that balance was counted as income to me. So instead of 40k to the bank I got hit for about 8k by the IRS by the time it all settled. [Previous page](https://boards.straightdope.com/t/need-lowdown-on-walking-away-from-mortgage-or-short-sale/829033.md?page=1) [Next page](https://boards.straightdope.com/t/need-lowdown-on-walking-away-from-mortgage-or-short-sale/829033.md?page=3)