The American psyche is to pay your debts on time and be good responsible financial citizens. A very good method of operation for sure.
There is also room for discussion when financial situations aren't reasonable to continue making payments on a home. I just saw a simple scenario which can be applied to many homeowners today.
A home was bought for $500,000 with 10% down payment 3 years ago. The home is now worth 35% less. If you continue making payments on this home and the home appreciates 7% per year (a hugely hopeful percentage) it will take 7 years to get to a break even equity position.
Your home payments are also significantly higher that what a rental payment would be.
The alternative would be to sell through a short sale and then re-enter the market 3 years from now.
That strategy - while not ideal or easy by any means - will give the new homeowner $130,000 in equity at the end of the same 7 years!
What do you think?
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