Mortgage payments have become a serious problem for many Americans. The current economic crisis has proven to most that the importance of the housing market cannot be underestimated. However, a new trend has developed that limits the permanence of mortgage agreements, making the process more dependent upon a person's willingness to continue payments instead of facing financial destitution. Known as strategic defaulting, a debtor may purposefully default on a loan payment, triggering foreclosure precedents.
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While many would try to avoid foreclosure at all costs, a devalued property may not be seen as worth the future mortgage payments. Especially in the current market, as property values are dropping rapidly in certain areas, the original mortgage may be seen as too much of an expense compared to the actual value of the property.
As there are obvious benefits to cutting a mortgage early, there are also the same penalties as if the default were unintentional. The largest problem with intentionally ending a mortgage early by failing to pay is the harm that defaulting can do against someone's credit rating. As credit rating determines the probability of getting future loans as well as details such as the interest rate, maintaining a good credit score should be a high priority for homebuyers.
Depending on the analyst, it may be considered morally wrong, although not always legally problematic. In reality, financial situations can become seriously dire without drastic action if a home devalues at an alarming rate. Given the current economy, dipping home prices are not only common, but can be strongly downward.
There are multiple strategies a person may consider if facing even greater financial woes. While penalties for strategic defaulting or bankruptcy can be stiff, the benefits may actually outweigh these issues.
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