"Strategic default" a griowning problems for home mortgages

Um, what? Even after itemizing, I wasn't getting back all 6.45% of my interest rate I was paying. I know that's not low, but it's not high, either. I was not getting back the $1700+ I had paid out in interest in 2009. I would not get all $30K back from the interest in 30 years from tax breaks.

I never said the government will pay your interest. I said that with the writeoffs, it approaches the rate of inflation.


You can just walk away, but you can't "total" a house. You are still shackled with the mortgage payment unless you get that insurance. You just have a destroyed property on soggy land that you are paying a house payment a month for. Not to mention the hit you would take for simply not paying it anymore and leaving it with the bank. In a situation your house is destroyed, I would want to keep my credit rating high when I look for a replacement house.

You and I live next to each other in the exact same $250k houses. You pay off your mortgage. I don't. Neither of us have flood insurance and our houses are totaled with water damage and mold. Guess what, I can simply walk away and take the credit hit. You're left $250k out of pocket and with a property that isn't worth anything near that.

Granted this is an extreme example, but a 'feature' none the less.


So far this is a better reason than the others, however, it's pretty darn hard to litigate against someone for property if you have the deed in your hand. It's not the bank that answers surveyor queries. What other land/property lawsuits would one have to worry about?
I'm not talking about lawsuits over the property. I'm talking about someone going after anything you own of value.
 
You and I live next to each other in the exact same $250k houses. You pay off your mortgage. I don't.

I pay cash for my house. You get a traditional mortgage. 30 years have passed and we both lived next to each other the entire time. Who wasted more money?
 
I never said the government will pay your interest. I said that with the writeoffs, it approaches the rate of inflation.




You and I live next to each other in the exact same $250k houses. You pay off your mortgage. I don't. Neither of us have flood insurance and our houses are totaled with water damage and mold. Guess what, I can simply walk away and take the credit hit. You're left $250k out of pocket and with a property that isn't worth anything near that.

Granted this is an extreme example, but a 'feature' none the less.



I'm not talking about lawsuits over the property. I'm talking about someone going after anything you own of value.

Ahh, this makes far more sense. Very good.
 
I pay cash for my house. You get a traditional mortgage. 30 years have passed and we both lived next to each other the entire time. Who wasted more money?

The person that rented. At least in the Cleveland area.
 
You and I live next to each other in the exact same $250k houses. You pay off your mortgage. I don't. Neither of us have flood insurance and our houses are totaled with water damage and mold. Guess what, I can simply walk away and take the credit hit. You're left $250k out of pocket and with a property that isn't worth anything near that.

Granted this is an extreme example, but a 'feature' none the less.
I'm not talking about lawsuits over the property. I'm talking about someone going after anything you own of value.


I would counter that if you have the money to pay cash for a home, then you would be pretty damn stupid not to insure it for what would be the equivalent of approx 2 months mortgage payments per year for home & flood. Full insurance on a paid off car is dumb. Full insurance on a paid off home isn't.
 
I pay cash for my house. You get a traditional mortgage. 30 years have passed and we both lived next to each other the entire time. Who wasted more money?

assuming you both had the cash on hand at time of purchase, i'd say the person that paid a 6% mortgage, wrote off the interest paid for tax credit, and made 5% on the invested cash would do better than the person who paid cash for the house. they're both going to get the same upside from appreciation of the house when they sell, so that balances out.

works best for the person with the mortgage if they keep the maximum mortgage at all time for maximum interest write-off. if they eventually pay off the house the interest write-off decreases and they wind up behind. they'd have to renegotiate to take out cash or sell within about ten years.
 
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I pay cash for my house. You get a traditional mortgage. 30 years have passed and we both lived next to each other the entire time. Who wasted more money?
It depends on my interest rate and the rate of inflation. You could actually have paid MORE than me. With inflation, I'm making the same payment every month with less "money".
I would counter that if you have the money to pay cash for a home, then you would be pretty damn stupid not to insure it for what would be the equivalent of approx 2 months mortgage payments per year for home & flood. Full insurance on a paid off car is dumb. Full insurance on a paid off home isn't.
Like I said, an extreme example...

And here's another reason that I remembered on my drive home. Real estate is a notoriously poor investment choice. IIRC, since the GD, over any rolling 20 year period, the real rate of return on real estate is something like 1%, while the stock market is 3%. You're wasting money by investing in a home, rather than the stock market.
 
It depends on my interest rate and the rate of inflation. You could actually have paid MORE than me. With inflation, I'm making the same payment every month with less "money".

Like I said, an extreme example...

And here's another reason that I remembered on my drive home. Real estate is a notoriously poor investment choice. IIRC, since the GD, over any rolling 20 year period, the real rate of return on real estate is something like 1%, while the stock market is 3%. You're wasting money by investing in a home, rather than the stock market.

well, yes, but then again, you really shouldn't be using your home as an investment. The real advantage of buying a home is the fact that you aren't wasting your money on rent, and instead at least getting some return out of your monthly housing costs in equity, as well as the before mentioned write offs for taxes.
 
It depends on my interest rate and the rate of inflation. You could actually have paid MORE than me. With inflation, I'm making the same payment every month with less "money".

Do you think that inflation would account for another 200K over the course of 30 years? Because that's how much on average (with a 4% Interest rate) you'd pay over the life of your mortgage.
 
well, yes, but then again, you really shouldn't be using your home as an investment. The real advantage of buying a home is the fact that you aren't wasting your money on rent, and instead at least getting some return out of your monthly housing costs in equity, as well as the before mentioned write offs for taxes.
Since it generally appreciates, your home IS an investment. And if you plop down $200K of your own hard earned money, well then you just made an investment. My television is an investment, just a shitty one.
Do you think that inflation would account for another 200K over the course of 30 years? Because that's how much on average (with a 4% Interest rate) you'd pay over the life of your mortgage.
If the interest rate is 4% and inflation is 4%, then yes. That's exactly what I'm getting at.