I have been reading about this from the UK. Can someone explain to me if I have it right? I take out a 250k mortgage with my bank, I start paying the payments on the mortgage but something happens like rates increase or the value of my property tumbles so I can send the keys to my house back to the bank. My house is now worth 200k so when sold there is still say 40k of mortgage not accounted for.
What I cant figure out is what happens then? Please dont tell me that you are let off the debt?!
In my example above who carries the can for the 40k of debt? In the UK you are held liable for this sum but things I am reading make me thing that it may be different in the US.
No-one in the UK would ever dream of doing it. We are personally liable for our entire mortgage. The banks will sell the house then come after the clothes off your back for the rest. There are only 2 ways to end a mortgage in the UK, pay it off or default on it and declare bankruptcy.
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“Jingle Mail” refers to the jingling of keys in the padded envelope used to mail back keys to the lender. Yes, the notion started in the US. Some US states are called “non-recourse” states because the lender cannot sue you for the balance you owe on the house after you return the house to the lender (who actually “owns” the house until you pay for it).
The nasty little trick in all this is that in most states, the lender CAN go after the borrower for the full amount of losses, costs of auction/foreclosure sale, etc. And if they don’t collect, what was borrowed and not repaid legally becomes taxable income. Have to pay state & federal income taxes on whatever you do not repay.
So you want to do jingle mail in UK? US? Anywhere? Be prepared for some nasty, costly surprises over the next several years. It is cheaper to continue paying for your house as agreed in the mortgage documents than to try to weasel your out of the debt. A lot of people are going to learn the h-a-r-d way to pay their debts. Don’t you be one of them.
I don’t know what jingle mail is other than maybe sending your keys back? LOL
As far as who is on the hook in the US for the shortfall, the lender can choose to forgive the debt and send the previous owner a 1099 and they have to claim that on their taxes as income and owe the IRS.
If the borrower lives in what is called a “recourse state”, after the foreclosure, any shortfall can be pursued by the lender through collections, court etc.