Should I Pay My Mortgage?

Should I Pay My Mortgage?

The rich rule over the poor and the borrower is A SERVANT TO THE LENDER (Proverbs 22:7).

Mandatory reading for everyone in this country who has an inkling to want to operate in our “new economic” climate is Financial Piece by Dave Ramsey.

Just last night I was reviewing some startling facts in the book as quoted by consumer reports the typical household debt totals more than $38,000 on average cardholders carry a $8,367 balance on their credit cards month to month paying an average of 18.3 percent interest.  Nearly 80% of all credit cards are at or near their maximum credit limit and almost 40% have taken cash advances from one card to pay another.

Sears charges 21% annual rate and finance income accounts for over 40% of operating income.

Now, lets picture someone facing foreclosure who’s debt to income ratio is 80% meaning debts divided by income = 80%.

Now the question is asked, should I pay my mortgage?  In this case the debtor can’t afford the house and even if they did borrow money from mom or dad to “get by” they might as well have gone on a Bahamas cruise and blown the money or Vegas gambling spree has better odds.

I’ve done countless short sales where I’ve seen debtors completely cash out 20 year savings to pay a mortgage that’s 30% over financed only to watch it go to foreclosure.

Case in point, my partner Todd and I did a short sale with Betty on a six-plex apartment building here in St. Augustine at the beach.  The mortgage was $963,000. By the time we found her she had emptied a $97,000 pension fund to stave off her foreclosure.  At age 69 the lender reminded her how embarrassing it would have been to see her name on the foreclosure list.

To make matters worse…

The retail value was only $350,000 on the building.  At our meeting she began to weep as she told us how she “wanted to do the right thing” and proceed to empty every account to carry her reputation.  Oh, did I mention when the insurance went up she was $3,900 negative cash flow FULLY OCCUPIED.  When payments stopped the tenants got foreclosure notices and moved.

Betty’s failing health, saving depleted, can’t work, has no family to support her and Betty asked me “should I find a way to pay my mortgage?”

I asked her: “is this property serving you or are you a servant to it?”  Obviously we CANNOT and WILL NOT EVER TELL A DEBTOR TO STOP making payments in hopes we can get a short sale.  Always put the debtors interest first, what if that was your grandmother or mom?

Bottom line…

Fannie Mae will issue a mortgage to someone who has a short sale after 24 months.  They will not to someone who has a foreclosure.

It’s time for our country to re-invest themselves you could start by tearing up all your credit cards and using debit cards only.  I’m serious about this, the real answer to all this should be on the tip of your mind “Is this action getting me out of debt or making me a servant to my lender?”

Tell me your thoughts I challenge you to go get Dave Ramsey’s book “Financial Peace Revisited.”  Read it cover to cover, you’ll thank me later.