Nearly half the home mortgages in the U.S. will be underwater in less than two years, predicts Karen Weaver, a senior Deutsche Bank research executive. Her reasoning, outlined by Fortune's Scott Cendrowski, is pretty compelling. Zillow.com reported separately that 23 percent were already there when the second quarter ended, which puts the fall a tad faster than Weaver projected.
Ours won't be among them. Ms. Ktnomics and I already paid ours off in anticipation of what I expected would be retirement in a few years. We could still feel some ripples though. Declining home values that are feeding the mortgage tsunami, and which Yale economist Robert Shiller predicts may be with us a long while, will further shred one of our potential safety nets.
The more interesting question is how to brace for such a calamity. Turns out there may be times in this current economy where our first impulse - to shed debt by paying down the mortgage as quickly as possible - is wrong.
Briefly, we need to to think through all the alternative uses for the money we would plan to throw at the mortgage, as MSN Money contributor Liz Pulliam Weston outlined in a recent article.
And especially if your mortgage starts going underwater, it probably makes sense to first build up your emergency funds, make some extra retirement plan contributions or buy some health or disability coverage before you plump up your mortgage payments. That way you'll still get good out of money that otherwise would just go to the bank if you lost the house anyway.
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