A recent Rismedia article speculates that paying your mortgage on time when you're underwater may not actually be the best thing for the economy. The reason is that most of these homeowners are paying higher interest rates than the current national average and despite the fact that they have jobs and can afford the payments, the debt load is keeping them from refinancing, moving to a larger house or a different neighborhood, spending money on a new car, and so on.
The article states that there's an estimated 15 million upside down homeowners and roughly half of them owed at least 25% more than their properties were worth in March of 2010. More than 4 million are upside down by more than 50%.
These people are essentially trapped and probably won't see positive home equity values for years. They can either quit paying and suffer the loss of credit and be forced to move, or they can continue to fore-go spending money that would help the general economy in order to make their mortgage payments. The question is, which course would help the economy recover more quickly?
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