Tuesday, December 18, 2007

Walk away, and do it now!

Why you should walk away, now...
If you bought a house in 2005-2006 in the affected areas of the country, you must walk away from your house and the sooner the better. Its the only sane decision you can make as a human being. Sanity, meaning to make decisions which are in your best interest.


Here's your situation:You bought with a 3-5 year outlook. No one pays principal or gains equity in the first 5 years, except through appreciation. There is none. The 3-5 year outlook is bust.OK, maybe you bought with a 10 year outlook. No one pays principal in the first 10 years, no one gains equity either except through appreciation. You are probably 100-150K in the hole on appreciation right now. You will have gained nothing by the end of 10 years.


OK, so what about 10-15 years out? Well, many people have built in balloon payments between 50 and 100K at 15 years. This will negate any equity or appreciation that could be possible in the 10-15 year range.


So the situation is this: you are making higher payments than necessary on a home which is not worth what you paid, and you have no real expectation of capitulation in the next 15 years. If you're really unlucky, your payments may be going up next year or the following one.


The only sane, rational, financial decision you can make for yourself and for your family, is to walk away. Your bank is walking away, Wall Street is walking away, its time for you to do the same. Put aside pride, ego, wishful thinking. The sooner you get this behind you the better off you will be.


If you could rescue your financial position and be creditworthy in 4-7 years why would you (a sane person) continue to deplete your finite resources on a bad bet, and a diminished future?


The answer is you wouldn't. No sane person would. Time to walk away. Just walk away and have your dream another day.

Hmmm... Something to consider.

It can be said that the banks and wall street are walking away from the housing bust they helped make in the sense that they are happy to fob the debt off onto someone else (the American tax payers) through the non-sensical bail out plan. It follows that if you walk away from a house you can't pay for you are simply doing the same thing.

This mortgage bailout (thinly disguised bank bailout) only creates debt serfs out of unfortunate American home buyers while banks maintain an income stream from the continued payments. They may take lower payments but you can bet they will write off the paper loss, and Uncle Sam will forward that bill to the tax payers.

It would also appear that if you choose to walk away you would not be the first. This is already taking place in the harder hit regions of the country like California, with moving trucks showing up suddenly and the former owners vanishing in a puff of U-Haul orange.

It seems many are now choosing not to walk headlong into debt slavery but instead choosing freedom and walking away.
Vern

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