With bills coming in from all directions, and not enough money to pay them all, many are now deciding to pay off their monthly credit card bill instead of their mortgage. According to TransUnion, before the recession 37 percent of people would make credit card payments before a mortgage payment. Now that number has shifted with approximately 50 percent of those consumers who are in default on a mortgage loan still making credit card payments on time.
For some financial experts this shift in payments did not come as a shock, as many are relying on credit cards for everyday purchases like gas and food, which means people want to stay current on them. However, with a mortgage it can take months – if not years – for missed payments to actually turn into a foreclosure, which for many seems too far away to worry about as much as having access to a credit card.
For example, one Orlando, Florida, resident said that over the past few years both of his properties drastically decreased in value, with one condo decreasing to the point that charging rent wouldn’t cover his mortgage payments. Instead of struggling to make the payments on the one condo – and another house – the resident said he just stopped paying the mortgages.
On one property he claims to have stopped making payments 19 months ago and is yet to hear anything from his lender, and with the condo the foreclosure process has already been started. However, when it comes to student loans and credit card payments, the Florida homeowner is current and always has been.
And while some have chosen to take the same approach as this Florida resident, some financial advisors warn against this trend and claim that a mortgage is still the most important debt to pay on time, as the financial and emotional turmoil of losing a home can continue on for some years to come – even after the property has already been sold at auction.
Luckily there is several debt relief options for those struggling with credit card and mortgage debt, and a person should look into all options that may be available before just deciding to pay one debt over another.
Source: The Washington Post, “Growing number of consumers pay credit card debt before mortgage,” Ylan Q. Mui and Dina ElBoghdady, 13 May 2011