What are the credit ramifications of just walking away from a home?
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M$2 Answers
1. Foreclosure will hurt your credit score and it can remain on your credit report for up to 7 years.
2. After going through foreclosure you are most likely will need a large down payment the next time you apply for loan to buy a home. You are most likely to have higher interest rate.
3. There will often be tax penalty charges that comes together with foreclosure. If the house sells for less than the amount owed, the rest of the loan balance is considered "forgiven." The IRS considers it as income as a result, you may be taxed on the difference between the amount you owed and the amount the house is sold for.
4. If you listed a specific property when you applied for a loan, that property can also be taken.
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M$
Before you put the house on the market, if it is an option, take a step back and ask yourself would renting actually be easier or even cheaper? Is there an alternative such as renting out your property for enough money to cover the mortgage.
Some governments have schemes in place where they rent your house and guarantee a monthly income figure, so you do not have to worry about tenants being late with rent payments every month.
or
How about renting a room or two in your house to help with the payments and lower the stress levels your experiencing. It is up to you who you allow to live in your home and you would have the right to administer credit checks and reference checks prior to agreeing for anyone to move in. You could also ask for a larger deposit to help towards ensuring an individual can afford to rent with you.
Some banks allow you to change your mortgage type up to two or three times a year. This means if you are paying a full mortgage, you may be able to switch to interest only for a while until things pick up!
There are many alternative options out there, you just need to find the right one for you.
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