As house values and incomes both plummet for many because of the worldwide recession, millions of mortgage payers are finding it evermore difficult to keep up with their mortgage repayments. Arrears are on the rise, and home foreclosure proceedings are being commenced at a rate not seen since the downturn of the 1990s.

Bearing in mind these problems, many homeowners who are having severe problems making their mortgage payments are tempted to just hand back their house keys to the mortgager and leave behind the whole nightmare, so averting the strain of legal foreclosure proceedings. In fact, this ‘voluntary home repossession’ option is sometimes even advised by the mortgage company as the best resolution for their harried client.

Alas, this reputed solution allows for a much better outcome for the lender than for the householder. The lender will be able to nullify the costs incurred during the foreclosure action, and will be able to dispose of the property more rapidly and so get the debt off its books faster. For the homeowner, things aren’t as straightforward.

For a start, until the house is disposed of and the home loan paid off, you will still be liable for making payments, and will be charged default fees if you miss them, This will push up the debt at a perilous rate. Also, in the meantime, you’ll still have to have somewhere to live, and you could find yourself paying rent while building up bigger mortgage debt – and this situation could last a long time considering the depressed property market of today.

There’s also the drawback that the mortgager will probably seek to sell the home speedily at an auctioneers, and this could mean the price is heavily discounted – it may not even fetch enough to pay off the mortgage, so you’ll have lost your home yet nevertheless owe money on it.

There’s no simple solution to mortgage problems, but hoping to avoid repossession by giving back the keys isn’t generally a good idea. Trying to get by long enough to sell the property yourself on the private market is likely to give a more positive result than walking away and hoping your lender will keep your best interests in mind when resolving the debt.

About the author: Nicholas writes for Debt Nation where you can read more about handing keys back to the mortgage company along with other mortgage debt problems.