Strategically defaulting by walking away from your Arizona mortgage because your home’s value has substantially decreased can cause all sorts of difficulties for you. You will ruin your credit and have to pay higher interest rates on new credit or you may not even qualify for any new credit including another Arizona mortgage for at least 3 or 4 years or longer. Your credit score can dip as much as 300-400 points by defaulting on your Arizona mortgage and having your lender foreclose on your home.
A foreclosure stays on your credit 7 years. However, unlike other states, the lender may not obtain a deficiency judgment against you in Arizona if the home is a residential property or duplex located on 2.5 acres or less under Arizona Revised Statutes, Title 33, Chapter 6.1. You may not be able to rent a property with bad credit. You could be denied a high security clearance employment position or other employment position. Repairing creates takes time, and you should think seriously about the long term consequences of your actions by choosing to walk away from your mortgage.
Try and work out a solution with your lender first before strategically walking away. Call and tell them that you are thinking about walking away from your mortgage because your home’s value has declined so much that our don’t think you will ever recoup your losses. If your home has dropped in value 30% to 50%, you are probably right. If you tell them your intentions, they may give you a mortgage modification or some other type of arrangement. Generally, mortgage modifications are for borrowers how are upside down on their mortgage and who do not have sufficient income or assets to make their payment or pay off their mortgage. However there are so many foreclosures right now, lenders don’t want any more foreclosure inventory on their books. They may be motivated to make a deal.
Also, you might want to have a real estate foreclosure defense attorney look at your original loan documents to determine if your lender committed any predatory loan practices or violated lending laws. If they did, they you can use that as a bargaining chip to negotiate a favorable deal with your lender.
Before you make any hasty decisions that will affect your life and your credit, think about other options, and talk them over with your lender and your attorney. A strategic default is a serious matter, and you should weigh all your options first. There may be a solution that you have not thought of. Getting help making the decision is the best advice. It is not something that you should rush into. You may be able to get the lender to reduce your principal balance and lower your interest rate. Be creative and persistent, and you will find a solution to your problem.
If you do decide to walk away, you may want to purchase another smaller and more affordable home first before you ruin your credit and cannot obtain a mortgage. Talk to your financial advisor as well to determine what the best solution is for your financial situation.
If you have any questions about this or if you have any questions you’d like us to answer on our podcast, you can email your questions to firstname.lastname@example.org or give us a call at (602) 535-2171. Be sure to ask us for a free quote on your next mortgage. We’ll personally work with you and help you through the whole process.
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Be sure to ask us for a free quote on your next mortgage. We’ll personally work with you and help you through the whole process.
Signature Home Loans LLC does not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only. You should consult your own tax, legal, and accounting advisors before engaging in any transaction. Signature Home Loans NMLS 1007154, NMLS #210917 and 1618695. Equal housing lender.BACK TO LIST