A friend of mine went through a nasty divorce last year. The very weekend that the ugly argument occurred that ended the marriage, both he and the ex-wife moved out of their home. The home is sitting empty today with a for-sale sign, grass that doesn’t get cut, and angry neighbors. What’s worse is what is happening to their credit score.
He called me yesterday and wanted to see another home – an $80,000 fixer-upper that would ordinarily be a steal. There’s zero chance he will get a loan for the house. When you walk away, you pretty much guarantee no chance of buying (unless you win a lottery or inherit money) for several years.
Reuters Finance featured a story on just this issue,
The penalties largely revolve around your credit record, which admittedly gets blown up in the near-term. For a few years you can likely forget about qualifying for a mortgage or a car loan. When lenders are ready to take a chance on you again, you’ll have to pay for the privilege, with stiff interest rates due to your default history.
Sometimes a strategic default is the best option. But make sure before you do, you can live with the results.
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