High interest rates combined with rapidly declining home value can result in a homeowner owing more than his home is worth. Continuing to make payments on the home means spending money that may never be recovered, even if the home is sold. If you purchased the home for little or no money down, you may feel as though you have little to lose by walking away. Some credit analysts argue that repeated late payments may damage credit for a longer period of time than one foreclosure.

On the Other: Reasons to Stay

Staying with your home may result in credit problems, but walking away guarantees credit repercussions for up to 10 years. Fannie Mae and Freddie Mac ban homeowners who walk away from receiving mortgages for several years. Although the IRS has granted homeowners in foreclosure a tax reprieve, walk-aways may have to pay taxes on any unpaid mortgage amount. Many struggle to walk away from their mortgages for moral reasons.

Bottom Line

Walking away from a home is not simple. There are many negative repercussions that could last for years and walking away should be considered as a last resort. Walking away is a decision that homeowners should not make lightly or without the counsel of an attorney and a tax professional.

Source:

CNN Money.com: Can't Pay? Just Walk Away

Westco Realtors, Inc.: What Happens if I Just Walk Away From My Home?

National Public Radio: Why Not Just Walk Away From a Home?