by D'Nar Nya

Created on: May 18, 2008   Last Updated: May 19, 2008

It is an excruciating choice many Americans are now facing. Is it worth it to continue paying the mortgage, or is it better to just walk away? The once unthinkable prospect of abandoning one's own home is now a prospect many are pondering. There are two components to this dilemma. The first is philosophical in nature and relates to ethics and morality. Many believe a deal is a deal, and walking away constitutes abrogation of one's word. Others view it as a business transaction with this outcome being a risk the lender assumed volitionally and with great profit motive. A rational case can be made for either side of this argument, and in the end moral judgment devolves to the individual.

Ethics aside, many want to know the hard facts surrounding the benefits and ramifications of turning over the keys to your lender. The most obvious benefit is escape from an oppressive mortgage payment. If you were easily able to service the payment, then you wouldn't be considering this measure. Today, most likely a high payment arose from an adjustable rate. You could afford the initial payment, but now it is just too much. Unable to sell your house for anywhere near the current mortgage balance you feel stuck. Walking away it is often possible to rent a comparable property to the one you are leaving at a fraction of the cost.

The aversion to renting becomes much more palatable seeing your current ownership situation is not resulting in any equity either. If anything, it is the opposite if you are in a declining market. It can be very possible you are paying a mortgage each month while the amount of your equity plummets. Some markets may not see the valuations attained at the peak of the housing heyday again during our lifetimes. In this scenario, the equity which home ownership represents becomes illusory. Add to that the burden of rising local property taxes and the prospect of walking away can become even more alluring.

Even more appealing is the prospect of getting to keep your house and have the mortgage erased. This is a long shot, but it can happen. Many lenders are having difficulty satisfying the court's demand for full chain of title. This relates to the complex CMO arrangements in which many mortgages now reside. There is a story of a gentlemen in Florida with a very expensive house who has avoided foreclosure for over a year by just showing up in court and contesting chain of title. Again, morality aside, many of those in desperate straits today will employ any option,

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