Upside Down Mortgage Danger
Upside-down mortgage dangers
The primary danger of an upside down mortgage is of course not being able to sell it. With more
and more Americans going upside-down in their mortgages every year, it becomes more commonplace to us as time
passes, and we feel like the danger isn’t so bad.
But let me assure you; upside down mortgages are dangerous. Especially in the United States,
there is never any warning before you lose your job and are suddenly unable to make your house payment. But that’s
not the only reason for danger. In fact, there are hundred of reasons you might have to spend the money set aside
for your house payment, including medical emergencies, kidnappings, bank errors, theft, natural disasters,
The only safe thing to do is to get out from under that upside down mortgage!
For example, let’s say your twin brother has a house worth the same amount as yours, but he owes
exactly as much as it’s worth, while your home is $10,000 upside-down. If you both get laid off and can’t make your
next three payments (in most states) then your homes go into default.
Depending on the way the market is going, your brother may be able to refinance his home for a
slightly larger amount of money if he’s quick and has a good credit score. You, on the other hand, cannot.
But let’s say he can’t refinance. He still might be able to sell the house at fair market value
if he’s lucky, whereas you will be completely stuck with yours.
Being upside down on your mortgage at the time of default is a one-way ticket to foreclosure…
There’s no way out of it without the cash reserves sitting around somehow.
Although a foreclosure is the worst thing I would ever wish upon an enemy, there is one thing worse that happens to
people who are upsidedown on their mortgage… Sometimes after an auction, not every day but more often than a blue
moon, the bank SUES the evicted ex-homeowner for the difference.
Banks obviously don’t want to let this get to the 6 o’clock news, but every now and then if a
bank isn’t doing too well financially, they’ll have no choice but to aggressively go after people they already
foreclosed on just to make up for their loss.
Real estate laws are changing every year now due to horrible lending practices. With any luck
there will be a law passed soon that makes it illegal for a lending institution to lend more money than what a
property is worth. Maybe then so many Americans will avoid the dangers of upside down mortgages.