Is it Wise to Stop Paying my Destin FL Real Estate Mortgage?
Destin FL real estate as well as other niches across the country have been seeing an increase in “strategic defaults.” This is defined as borrowers who owe a significant amount more on the home they have purchased than the current value decide to stop making mortgage payment, but stay current on other loans such as vehicles and credit cards. According to a report by Morgan Stanley, approximately 12% of mortgages that were in default in February were “strategic.” The health of Destin FL real estate and many other areas of the country could be affected as well as mortgage lending in the future.
Influencing others who own Destin FL real estate could be a result of “strategic default.” People who see their neighbors and others doing this and begin to consider this option rather than waiting for many years to realize the equity in their homes. The high number of foreclosures on the market has taken away much of the social unacceptability attached to defaulting on a mortgage. In addition, in areas where the prices of homes are far lower than surrounding areas, this could become far more common.
Looking at Destin FL real estate in the future, this could have an even more extensive effect. Lenders would have no choice but to figure this into the rest of the risks they take when providing home loans and this would likely translate to higher interest or more of a down payment.
The people using “strategic default” is increasing. However, this is not easy to pinpoint with numbers. A conservative estimate is that 25% of those with negative equity in their homes begin to look at the home in the light of an investor rather than a homeowner. The higher the negative equity goes the higher the default rate.
Using data from TransUnion, reports from Morgan Stanley as previously stated, citing “strategic defaults” at 12% in February were higher among those with a larger balance on their loan as well as borrowers who had higher credit scores. The more time a Destin FL real estate owner must wait for a recovery in home prices, the more likely they are to default. If home prices drop again, this could have a dramatic effect on “strategic defaults.”