I was one of those people who couldn't just "sell the house". My builder went bankrupt, the remaining land was sold by Bank Of America for pennies on the dollar, and I was ~$100K underwater. Doing the math (based on historical yearly real estate appreciation), it was cheaper to have 3-5 years of bad credit than 10-15 years of payments just to bring the house to neutral equity. My HOA wouldn't allow me to rent our townhouse out because several people bought them as investments, so we had reached "rental capacity" before the subdivision was even complete.
I walked away, lost my $30K downpayment, 2 years of equity at $2K month in mortgage payments, and have ~3 years of bad credit. With only that negative mark on my credit, I still have a 680 credit score.
I'm never willing to bet again that I'll be in the same location for 15-30 years. I'd rather rent and take what you'd consider "equity" and invest it in something I can get out of in less than 60 seconds (ETFs).
EDIT: Mortgage underwriting guidelines now limit a new mortgage until after 3 years of a foreclosure, not the traditional 7. Why wouldn't someone walk away if it would take more than 3 years to reach neutral equity?
I walked away, lost my $30K downpayment, 2 years of equity at $2K month in mortgage payments, and have ~3 years of bad credit. With only that negative mark on my credit, I still have a 680 credit score.
I'm never willing to bet again that I'll be in the same location for 15-30 years. I'd rather rent and take what you'd consider "equity" and invest it in something I can get out of in less than 60 seconds (ETFs).
EDIT: Mortgage underwriting guidelines now limit a new mortgage until after 3 years of a foreclosure, not the traditional 7. Why wouldn't someone walk away if it would take more than 3 years to reach neutral equity?