It’s a scary thought, there are currently over 12 million mortgage holders in the US that are underwater on their home loan commitments. What does that mean?
Well, whilst I don’t want to drive the fact home and upset people but it means that 12 million people who own homes, have more debt outstanding on their property than the value of the property itself, which in essence means the word "home owner" is in itself factually incorrect as they own less of the property than their renting counterparts (whom own the big zero). It’s not a pretty picture and the figure is expected to rise to 48% or 25 million underwater mortgages by the end of the first quarter of 2011.
It’s a dangerous subject to become reminiscent with, but unfortunately I do have underwater mortgage or negative equity (as we call it in the UK), experience.
It may surprise people to know that as a victim of the last crash, I don’t sympathise with all in the underwater mortgage situation, but before you throw your laptop (or me) at the wall, let me explain why;
There are clearly individuals like myself some years ago, that were not very well informed as to the state of the housing market and as an upcoming professional decided to do what everybody else seemed to have already done i.e. jump in on the housing market to make some money.
Little was I to know back then that we were within weeks of the single biggest house market crash in a generation and unfortunately, my "investment" which was purchased utilising one of the many 100% mortgage schemes available back then, lost me approximately £20,000 ($32,600) in not much more than a week, I was devastated.
These individuals with an underwater mortgage situation can have as much sympathy as they require, as they have done what others have generally advised them to do, gained nothing and potentially destroyed a good few years of their lives in terms of paying back what they owe if indeed they do need to move on.
Yet, there is another section of the community who seem to be led by people about 5 years older than myself who have hit every single one of these bubbles exactly right and have made small fortunes from the housing markets, yet who also appear quite badly affected by the market crash this time around and seem to be the biggest complainants due to falling into underwater mortgage situations which has led to a lack of potential cash flow these days; To those people I will quite happily say “Go Swing!” as I have better things to do with my own time than to listen to your complaining.
Those may appear very harsh words, but I would like you to consider a few things here before condemning me;
- These individuals had it all their way for a very long time and some were even quite smug about it.
- The lifestyles of these individuals became over inflated in relation to their incomes, which lets face it is just irresponsible.
- Having overspent for years many of these individuals remortgaged their houses and put themselves into high risk situations by decreasing their equity to pay for their frivolous lifestyles.
Okay, so I am generalising which is not always good and I do apologise if the reader does not fall into that bracket. But having myself been in an underwater mortgage situation for many years and paid the price, I feel a little justified in my comments and even whilst I do empathise with those about to embark upon a similar journey of "pay back", I’m afraid they may just have to get used to the idea. The government did nothing to help the victims of underwater mortgages last time and I have serious doubts that will do anything this time either.
| |
StarReviews Top 3
Mortgage Refinance Sites |
|
 |
|
|
|
|
|
|
 |
Underwater mortgages have been brought on by a generation of greed, haven’t they? I know very few individuals who haven’t used the equity in their houses for one reason or another, from the more responsible approach of making household improvements or paying for their children’s education to the more frivolous buying an unnecessary new car or embarking on holidays of a lifetime, or simply believing they could use it to make even more money on stock markets or foreign exchange.
My advice for the individuals who do have
underwater mortgages is simple, yet historically sound; Ride it out, don’t move house and don’t sell (unless moving up the market). Housing for all its bad points will always come back with another boom albeit I have a feeling this one may take some time.
For those whom are genuinely worried about their situation, I would ask them to consider one thing;
Mortgages are generally 25 year propositions and that hasn’t changed. The interest rates are lower than ever and therefore the people who will find themselves suffering today are in the main those who seek to make their living from housing itself or have overcommitted in which case the crash is not responsible for their predicament. The money is paper based and any loss will only be realised if the property is sold and another not purchased. For those families who have chosen to set up a life long home, unless of course the influencing and rising unemployment issues become a factor then really the housing crisis is something you can let pass you by.
To those with
underwater mortgages who entered the market at entirely the wrong moment and did not enjoy the fruits of any gain, I sincerely wish you the best and empathise with your situation. Finally for the very same people who profited from the boom years again this time around. My message to them; sorry, what goes around comes around!
Tags:
loans,
finance,
Real Estate,
mortgage