I love your “Everyday Cheapskate” newspaper column. You’ve changed my life! Now I need help. My house is worth half of what I owe on the mortgage. Is it still considered a secured debt? I would love to sell it. I’ve even tried to give it back to the bank, but they won’t take it. Many people are in my situation. I’m trying to play by the rules, but I feel they keep changing. Laurie, Michigan
Thanks for your kind words. Many people tell me they’re getting the equivalent of a degree in personal finance just by reading “Everyday Cheapskate.”
The housing crisis in this country is a tragedy, and one that way too many people didn’t see coming when they mortgaged their homes so heavily. However, I do not see where the rules are changing, as you suggest. In fact, I see the opposite. Many people now want lenders to change the rules based on the economy.Technically, your mortgage is a secured debt only up to the amount you could sell it for at this time. That makes the whole thing pretty much unsecured.
I’d love to know why you are now wanting out of the deal. Is it because you just can’t bear the thought of your home being worth so much less than when you bought it?
If you can get past thinking about its market value and if your mortgage payments are still affordable, I suggest you stop thinking about its value. The market is what it is. You borrowed the money to buy the house. There wasn’t a clause that stated you would repay the debt only if the property continued to appreciate. The lender financed your purchase. Nothing has changed. Keep making the payments as you promised, and enjoy living there.
If you have gone through a life-shattering event like a long season of unemployment or something similar, and you no longer have the income to make the payments, consider a “short sale.” This does require lender approval and your credit history will take a big hit, but I encourage you to set up a meeting with a local real estate agent who knows your neighborhood and can advise you on the possibility and terms of a short sale.
Several years ago, I began following your advice about taking more control of my finances. You wrote about using cash instead of credit and debit cards. I began doing just that. On paydays, I’d stop at the bank and withdraw enough money to last until the next payday. I then challenged myself to keep some of that money, which would then go into a piggy bank at home.
I just want to thank you. Now that the banks are adding fees and debit-card charges, I am way ahead of their game. I still use only cash. I feel like I have won, and all from a lesson learned from you several years ago. Keep up the good work. We’re still listening! Carol, California