No. of Recommendations: 2
Hi Calabogie,

Have a rec, I like the linked site... however, I must help reset a prevalent misunderstanding.

The other issue that isn't addressed very often in this type of information is the fact that so many people who are underwater on their mortgages are still current in their payments but have very little hope of selling their home in their lifetime.
Being underwater is no factual barrier to selling a home.
a) A home can be sold on a short-sale basis, with a *potential* temporary inability to get a new mortgage at a high LTV (low down payment) for perhaps 3-5 years, and ALSO resulting a (often significant) INCREASE to lifetime net worth, or
b) A home can be sold, and the currently unsecured balance can be carried forward on a remaining unsecured basis, with no difference to the individual's credit or net worth at all.

Again, being underwater is not a financial constraint against a homeowner selling, and either acquiring a more suitable home on rent/lease, or buying with unrestricted financing.

My daughter is in this position and there are really no good solutions. Her current home is valued at just a bit more than half of what they paid for it which makes it extremely unlikely that they will be able to sell it in the next 10-15 years. With children that means they will likely be locked into that area for another 3-5 years after that (getting the children through high school and college) and at that point they probably won't WANT to move.
I hope you can digest this, and then help your daughter digest this. She actually has very little constraint, and can make moves that support their family intelligently.

Luck!
Dave Donhoff
Leverage Planner
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