House

Rules of Money Management Haven’t Changed

Dear Mary,
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

House
Dear Laurie,
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.

Dear Mary,
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

Do you have a question for me? Get in touch by using the contact form, the comments section, or write to Everyday Cheapskate, P.O. Box 2099, Cypress, CA 90630.

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  1. donedittydone
    donedittydone says:

    I love DPL and usually agree with Mary, however, I think this type of response to a very relevant question regarding the housing market is short-sighted. In some parts of the country, “underwater” means 50% of the home to loan value…and other parts in might be 10%. For people who are hundreds of thousands of dollars underwater, they are wearing a financial albatross on their neck. There are options for underwater homeowners such as a short sale. Banks are loosening their requirements for this as many people are choosing to stop paying their mortgage, living in their home for an extended period time and saving money…banks are more willing to work with people who are underwater and can afford their payment to avoid this type of scenario. It’s really important to find a real estate agent that specializes in short sales in your area and see what your options are for your situation.

    There may be a credit hit that one might take if they short sale, but in a few years, they will be able to come out on the other side and possibly able to purchase a property at a lower rate. A family must ask themselves what they are wanting out of life over the next 5 years…to still be underwater on a home that they have continued to pay on with no real increase in value OR taking charge of their situation and taking a credit hit via a short sale and making financial decisions based on the current economic situation while providing for ones family and future.

    To clarify, because I adore Mary Hunt, the principle of money and saving haven’t changed….but, the housing crisis has caused a shift…especially for those who have been “riding” out the market for the last 4-5 years only to see property values continue to drop in value. Banks are more willing now to work with those of us who have paid on time and have tried to make the best of our home situation.

    There are calculators online that can show you how long it will take to recoup money on a home that is underwater. Waiting 50+ years is not a realistic option for homeowners that are loan-to-value drowning in their underwater home…even if they can afford the payment.

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  2. Barbara Girdlestone
    Barbara Girdlestone says:

    Mary, I love reading Everday Cheapskate. Targets is coming to Hamilton, ON Canada. Can you tell me what they are like. I heard you say they have a tough return policy. How are their prices? customer service? Their stores? Couldn’t be any worse then Wal-Mart. LOL. I really would like your opinion.
    I enjoyed subscribing to Debt Proof Living but couln’t afford right now. I really miss reading the articles and the forums and hope to be able to return soon.
    Barb

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