Q: My mortgage was fixed for five years and is set to start adjusting in five months. I talked with my mortgage broker and she said that my payment will go up by about 40 percent at that time, which I certainly cannot afford. She ran some comps and told me that I owe $100,000 more on my home than it is currently worth. Her advice was that I should buy another, lower-priced home right now, and then just stop making payments and let the bank foreclose on it. Should I walk away from my home?

A: No. The only thing you should walk away from right now is your mortgage broker.

Mindset Management

I commend you for staying conscious of what’s going on with your mortgage and trying to make proactive efforts to handle the upcoming mortgage payment adjustment in advance. Those who wait until the adjustment has already happened end up in desperation and panic — not a fun place to be.

Owning a home is a very grown-up thing to do, and if you are sufficiently mature to own a home — either your current one or a future home — then you are certainly mature enough to deal with the consequences of some less-than-perfect mortgage decision-making. There are many options for proactively dealing with your impending mortgage adjustment short of abandoning your home. It would be a major step in the right direction for your relationship with money and your personal financial and emotional maturity for you to take responsibility for the consequences of your past decisions and pursue those options before throwing in the towel.

There’s an old saying to the effect of "the way you do one thing is the way you do everything." I don’t think this is always true, because I believe that every one of us can find examples of times when we have made smart or dumb decisions, acted quickly or procrastinated, and been kind or mean. But with that said, in certain areas of our life we tend to act out certain patterns of behavior over and over again. Consider this — in your personal financial decisions, do you often find yourself backed into a corner and looking for an escape route? Many homeowners who just "walk away" from their homes are simply acting out one more instance of a lifelong cycle of overextending themselves, then bailing out. Consider taking this opportunity to break this cycle, and then harnessing the learning you gain and the momentum you create to become a more educated, savvy and deliberate mortgage and financial decision-maker in the future.

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Action Plan

Here’s a step-by-step action plan to take in the event that your mortgage is about to start adjusting.

1. Try to refi. If you are worried about being upside down on your home (i.e., owing more than it’s worth), you might need to assess how sustainable this home is for you. If you simply bought way more home than you can ever realistically afford with a reasonable mortgage, you should jump straight to #3 and try to sell your home. If other events, like a temporary loss of income, are making it difficult for you to afford your home now but you think you can afford it over the long haul, work with an ethical mortgage broker to see if it makes sense for you to refinance your mortgage, and whether any affordable mortgage options that are sustainable over the long term are available to you.

2. Loan modification. Call your lender!! Ask for the loss mitigation department; put together the hardship package they request (usually a bunch of your financial paperwork to show that you really can’t afford the upcoming adjustment); and then try to negotiate a few months with no payment, a reduction in the balance of your loan based on fair market value, an extension of the low-payment period for several more years, a reduction in interest rate, etc. Lenders vary widely in their amenability to making these sorts of arrangements.

3. Get extreme about increasing your income. If you truly want to keep your home, consider going to extremes. I’ve seen people avoid foreclosure by renting out rooms, taking second jobs or taking in freelance work on the side.

4. Short sale. If you just bought way more home than you can ever realistically afford, trying to liquidate your home through a short sale is a great option. Work with a Realtor who has experience successfully representing sellers in short sales. I’ve even seen homeowners have real estate investor friends purchase their home through a short sale, which may give the seller the opportunity to lease and later buy the home back.

Responsibility is the ability to respond, not the ability to run from your problems. The savvy way to respond to your situation is to exhaust the above ethically and financially responsible options before your mortgage adjusts. If you don’t, you risk reinforcing a pattern of financial irresponsibility, and ending up in a similar place — overextended and looking for an escape route — several years down the road.

Tara-Nicholle Nelson is author of "The Savvy Woman’s Homebuying Handbook," and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Ask her a real estate question online.

***

What’s your opinion? Leave your comments below or send a letter to the editor. To contact the writer, click the byline at the top of the story.

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