Ever wonder what the threshold is for the typical homeowner to dump their mortgage (and home)? An interesting New York Times article figures it out, claiming that there is indeed a “price for morality.” They researched mortgage holders and determined that when a mortgage exceeds a home’s value by less than 10%, rarely does the holder consider a “strategic default.” But when a home’s value declines to half of the mortgage amount, 17% of holders attempt to abandon it. The article went on to show some surprising information. Younger mortgage holders view strategic defaults less harshly.

Although strategic defaults are clearly a route used by some in their financial maneuvering, morality is not the only issue at stake. Strategic defaults mean credit scores drop precipitously and FICO organizations estimate it would take 7 years to rebuild a score that was 700 prior to a foreclosure. And getting a car or personal loan is largely off of the table.

DebtGoal’s advice: carefully evaluate your options and understand the implications of whatever strategy you use to fix your finances.

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