Pay off mortgage even if house is upside down?

[mndtrp]

"Generalization Alert" the banks were bailed out by the taxpayers for their lousy decisions, and greed. My pity towards them went out the window long ago. Hold them to the same standard as you are holding the mortgage holders and you get my attention......

You don't have to have pity for the bank, but you should certainly have pity for the taxpayers that covered the banks. Every person that walks away is one more person that my taxes are going to cover, instead of going to more useful things. You are essentially advocating someone to take money out of my pocket.

Yes it is a much better option to take a family and tear it apart, destroy the kids futures, and live under the stress and health implications that go along with it to make good on the commitment to Bank of America. And yes, while being melodramatic that is what is happening on a daily basis in America. I am sure that BofA is going to be there to give you a high five when you pay that mortgage off. Who is your commitment to? Your bank or your family? The mortgage holder screwed up, Bof A screwed up, B of A got bailed out.....why shouldn't you?

Maybe the family should have put more effort into purchasing a house they could afford, even on one salary if necessary. Oh, extenuating circumstances and whatnot! Buying a house is not a right, despite what so many people were thinking some time ago. I waited right through the boom before buying. I paid off all of my other bills first. I saved an emergency fund that would last me 6 months to a year. I then saved enough for a 20% down payment. Only then did I buy a house, and the house I bought had a low enough payment that I could survive even if I lost half of my paycheck.

This doesn't seem to apply to the OP's situation, though. The OP makes me think they are going to continue paying the mortgage, just not paying anything extra.

[mateosbaby]

Agreeing with Greebo. So what if you're upside down? You agreed to make the payments, come what may, for 15 or 30 years, so pay it! Like mndtrp said, you are advocating someone taking money from me, and I don't like that one bit. I have a family to feed, too, not just the "poor soul who got screwed by the bank." If they were too stupid to research and plan before they signed the papers, tough.

[wellison]

Thanks for all your responses. Just to clarify I am not looking to short sale or foreclose. Basically I am moving in 4 years and I can either save cash to use to make up the difference when I sell or make extra payments on the house and bring down the mortgage and I would reduce the amount owed when I sell.

An interesting note I used a payoff calculator and figured if I pay an extra $1000 a month for the next 4 years I will reduce my mortgage by $67,000, vs just saving cash I would have $48,000. that is $19,000 difference. Would that change any of your answers?

[scottp999]

An interesting note I used a payoff calculator and figured if I pay an extra $1000 a month for the next 4 years I will reduce my mortgage by $67,000, vs just saving cash I would have $48,000. that is $19,000 difference. Would that change any of your answers?

Depends on the situation. Do you have other ample sources of cash or cash equivalents? Being liquid in this economy means having choices. Putting $ into the walls of the house, that you may not be able to extract very easily, changes the benefit on the 19k difference you mention.

Don't expect people commenting here, that try to make their living from real property to be a proponent of defaulting. They make their money in the housing arena, and will defend it due to their interests. Most comes from positive cash flow, but they also don't want to see the property value drop, because it makes them less liquid, and limits their business and life choices.

I don't agree with those that make paying a mortgage a moral decision, it's a business decision. The bank accepted the house, at the time of the loan, as collateral. That was accepted by both parties as the remedy for non-payment. Yes, they can go for deficiency in lots of states, but that's often negotiable to a 0% interest note that is some fraction of the total deficiency. Do what's best for your family.

We could talk about the monetary and banking system, and that the bank did not actually loan you money they had, the system allows them to create it out of thin air, from your promise to pay. It's a bad system, and those that profit from it are doing anything and everything to keep it going, in it's final stages.

[Happyfamily2000]

Thanks for all your responses. Just to clarify I am not looking to short sale or foreclose. Basically I am moving in 4 years and I can either save cash to use to make up the difference when I sell or make extra payments on the house and bring down the mortgage and I would reduce the amount owed when I sell.

An interesting note I used a payoff calculator and figured if I pay an extra $1000 a month for the next 4 years I will reduce my mortgage by $67,000, vs just saving cash I would have $48,000. that is $19,000 difference. Would that change any of your answers?

Forgive me--

But whether your pay it down or when you sell it, what does it really matter? If you notice that the market goes up and you are no longer upside down, you can slow down payments. If you are to be selling a home still upside down in a few years, all you are doing is delaying the inevitable.

I really do not understand the logic of stashing the cash. In the end, the bank is still going to get the money. I would rather pay it now than at closing.

Without getting too much into the numbers, I am not sure that $48K of short term investment would yield $19000 in gains.

[Telephus44]

Thanks for all your responses. Just to clarify I am not looking to short sale or foreclose. Basically I am moving in 4 years and I can either save cash to use to make up the difference when I sell or make extra payments on the house and bring down the mortgage and I would reduce the amount owed when I sell.

An interesting note I used a payoff calculator and figured if I pay an extra $1000 a month for the next 4 years I will reduce my mortgage by $67,000, vs just saving cash I would have $48,000. that is $19,000 difference. Would that change any of your answers?

The $19,000 difference is faulty math. If you didn't pay extra on your mortgage, you are still paying it down over the 4 years. What you need to compare is how much you would reduce your mortgage with regular payments PLUS $48,000 to the $67,000.

Also, don't forget that the difference (and yes, I suspect $48K plus whatever you would pay down without paying extra is still less than $67K) is in home equity. Home prices can go up or down. And home equity is not as liquid as cash is.

[Natalia]

Yes- you would definitely come out ahead plugging it into your mortgage payment vs not because you will be saving some interest. But telephus is right, you wouldnt be ahead 19k. How much you would be ahead depends on your interest rate, amortization schedule.

If you have no other cash, i would keep some liquid, and put the rest with your mortgage pymts. Or save 1-3 months expenses first, and then plug the rest into your mortgage.