Sometimes, the prudent thing to do may not be such a simple decision.
Much of our society is build around trust and the general notion that most people are honest and nice. The refund system, for example, wouldn’t work in some countries because too many people would use the product and then turn around and try to get a full refund. Self service checkout is another brilliant idea that unfortunately wouldn’t work in many places around the world.
As a result of our honesty and our selfishness to play by the rules, everyone benefits.
A mortgage is a great financial tool, allowing potential home owners to realistically buy a house earlier in their lives by borrowing into future income. One can argue that without mortgages, land prices will be drastically lower, allowing everyone to buy anyway. But then how can anyone afford the rest of the house? The nice granite counter top, the stainless steel appliances, and the big screen TV cost money. Without credit, most middle class people cannot really afford anything other than buying the piece of land.
Lately, more and more people are just skipping their mortgage payments. Some cannot afford to pay because of a job loss, but others are just squandering, or as some call it, gaming the system. Many of these people are starting to blame the lenders for their reckless standards during the boom years. Unfortunately, the selfish act of conveniently missing payments doesn’t just hurt the lenders, but every one in the process.
… I’m now behind [on my mortgage payment]. I felt bad at the beginning, but I eventually got used to it. How long do you think I have until the banks repossesses my property?
How long the foreclosure process takes doesn’t matter. You borrowed money, and you signed the loan documentations at your own will. It’s your responsibility to pay it back. Do something about the missed payments immediately:
* Call your lender and tell him about your situation. Work something out. If you are behind, chances are they’d rather keep you as a customer than to evict you, which is very costly.
* Look to refinance because mortgage rates are at record lows if you have any equity left in your home. Even if you don’t, talk about this as one of the options. How about extending the length of the loan to lower the payment while we are at it too?
* A loan recast might be possible. Have you ever pay more than the minimum required monthly payment? Check to see if you can ask for a loan recast. I know the difference in payment is probably small, but it could still help.
Some people are happy to skip their mortgage payment. Actually, some are even bragging about it, as if it’s financially savvy to borrow money and not pay it back. I bet they have never been in a team environment where one member isn’t pulling his weight. When one person in the team doesn’t do their job, everyone else needs to help out. While the lazy worker may think he is getting off easy, everyone else works harder and have to share the load, working longer, harder and more miserable hours. Would the lazy worker be admired, or hated? Is it appropriate to brag about this? Would you want to suffer due to no fault of your own?
You may not want to pay your mortgage, but everyone else needs to suffer by paying higher fees to compensate for your own convenience.
Mortgages are great, but it’s still a privilege. Sure, the banks make money from it, but if no one profits, we can all kiss the mortgage industry good bye. Next time you hear someone talking about missing mortgage payments when affordability is not an issue, let them know that you are paying for his share.