[twigs]

They used to brag at the water-cooler about the killing they just made in Real Estate. Watch enough TV and you’ll see the “flips” that earn them a year’s salary in a few weeks. It all looks so easy you almost want to try your hand at it.

But today at the water-cooler you’re just as apt to hear about how someone has decided to “hang the key” and walk. They cannot handle the mortgage payments now that interest rates are about to reset on all those jumbo mortgages, and their property is decreasing in value.

Caution: if you walk, here’s what is likely to happen – the mortgage company will issue a 1099 for the difference between what the lender can now sell your property for, and what you owe! If this tax remains unpaid, a lien will be imposed. Bottom line is… now you deal with IRS.

A more sensible option would be to rent the property and move your family into cheaper quarters. This avoids foreclosure and gives the real estate market time to readjust and climb back up in a few short years and become a profitable asset once again.

In the meantime they should join the me for some serious passive income. It’s not an instant solution for any financial problem, but slow and steady wins this race. email:goplaytoo@charter.net

[richkid]

but interest rates are not even that high... and I hear they are even lower in the US...

[jasaunders]

What he is referring to are adjustable rate mortgages, that adjust the interest rate after a set period of time (typically 2 or 5 years, but can be anything). So 2 years after you buy a place, your interest rate increases to a variable amount.

Basically, people were incredibly stupid and were too dumb to realize that in 2 years they wouldn't be able to afford the place they bought. It is no one's fault but the homeowner's for not being financially intelligent enough to investigate their mortgage and know what their rates could be in 2 years.

Regardless, you are correct. Interest rates are still at historically low rates in the US.