In a story dubbed The Mortgage Trap CBS financial advisor Ray Martin advises,
“Let’s say you get a new job and have to sell the house and move and you are in a region where prices did not go up, they actually fell. You are going to have to write a check to the buyer at the closing table so they can take that home off your hands. You have to pay money to sell your house. That’s called being under water.”
Umm, what’s the difference if you loose money on the sale between writing a check at that point, or loosing your original down payment? Either way, you loose the money. Also, in the worse case scenarios (like a medical tragedy), you can walk away from the home loosing only points on your FICO score.
For most people, saving 20% down means they will never own a home. Because, long term real estate values always go up, more people are worse off with Mr. Martin’s advice.
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