Why Some People Continue to Hang on to an Upsidedown Mortgage

When They Should Just let it go!


Many people place a very high emotional value to their “home.” I talk to people everyday who have a significantly upsidedown mortgage but want to do everything they can to keep their home. If you look at it from a purely economic standpoint this makes no sense. The common sense approach to an upside down asset that most likely will never return to break even value is to let it go immediately – let the wounds heal – save some money – rebuilt the credit score – and then (assuming we actually have hit bottom at that point) go buy a house that is actually worth what you owe.

The problem with the above analogy is that when it comes to your home some people throw common sense out the window. A recent study in which psychotherapist Dr. Robi Ludwig participated found that even though people’s feelings about homeownership have changed, owning a home is still very much a goal for many Americans. She explained the financial downtown has caused people to reevaluate fundamental issues in their lives.

“Now that we’re picking up the pieces, we’re seeing a psychological shift,” she said. “Instead of looking at homes through the eyes of an economist, we’re realizing that a home doesn’t solely equate to financial return or measure only to a mortgage amount. Instead the home is the emotional center of our lives, and it remains a critical component of who we are.”

Another issue being re-evaluated is what homeowners want versus what they really need. According to the study, 90 percent of U.S. adults agree some people purchased more expensive homes than they should have before the recession. Meanwhile, 86 percent agreed people are more closely evaluating how much home they can truly afford now, compared to before the recession.


The people who for whatever reason are now struggling to hang on to a mortgage that is significantly negative can’t seem to let go. I see people daily struggling with this issue. Quite often it’s a married couple and one spouse wants to keep it and the other thinks they should let it go and do a short sale. Most of the time the spouse that is wanting to hang on just needs to hear the truth from someone other than their partner.

It’s understandable that when you own a home you make it your own. No one telling you that you can’t paint the walls any color you want. You maybe put some sweat equity into the home. You get a comfortable feeling pulling into the driveway and walking into the house. The problem usually is that it is NOT a good investment and it’s getting worse not better. What I tell most people facing this very difficult situation is where do you want to be in 3-4 years. Do you want to be in a better position or worse. Obviously most people say they want to be in a better position. If you have an upside down mortgage you need to look hard at what the future holds. Once we hit bottom of the current housing market, and I don’t think we have come close yet, then housing will get back to what it historically has done – rise at the rate of inflation. On the other hand if you do a short sale and work hard at saving some money and rebuilding your credit score then you will be in a position to buy a house for what it truly is worth… and most likely your monthly payment will have dropped substantially. You will feel much better pulling into your driveway then knowing that your home is now the investment you always wanted it to be. You will be able to save for retirement or take some vacations instead of struggling just to keep the bank happy.


The key is to fix the problem and let the healing begin. If you have a wound you take care of it right away and not let it go until it becomes a major problem. That is how you should look at a significant negative equity mortgage. Doing nothing is the worst thing you can do.


If you have any questions or concerns about your own personal situation I would be happy to give you a FREE legal consultation. You can call me at 916.442.6400 or send me an email at tgreene@tedgreenelaw.com or go to my website www.upsidedownca.com.

Ted Greene

California Attorney and

licensed Real Estate Broker