I wonder if you ran any numbers for your fictional family for whom "Your best course of action may be to fail to find a new job"?
lets say that in 2005 their monthly income was $4000 and the mortgage was $1000. After loss of half their income, they would make $2000 and still be paying the $1000 in mortgage.
Per your argument, they would be better off not finding a new job so they could have their mortgage payments limited to 38% of their income, or $760, leaving them with $1240 to live off of per month.
However, if they did find that job and returned to the $4000 per month, sure they would have to pay the original $1000 a month in mortgage, but they would have $3000 a month to live on.
I'm not an economist, so maybe you can explain to this to me: how is it better to have $1240 for living expenses than $3000? Even if the bank renegotiated the principal on the mortgage somewhat, would it really make up for a more than 50% reduction in disposable income?
I also posted this on the Trib site.
ReplyDeleteI wonder if you ran any numbers for your fictional family for whom "Your best course of action may be to fail to find a new job"?
lets say that in 2005 their monthly income was $4000 and the mortgage was $1000. After loss of half their income, they would make $2000 and still be paying the $1000 in mortgage.
Per your argument, they would be better off not finding a new job so they could have their mortgage payments limited to 38% of their income, or $760, leaving them with $1240 to live off of per month.
However, if they did find that job and returned to the $4000 per month, sure they would have to pay the original $1000 a month in mortgage, but they would have $3000 a month to live on.
I'm not an economist, so maybe you can explain to this to me: how is it better to have $1240 for living expenses than $3000? Even if the bank renegotiated the principal on the mortgage somewhat, would it really make up for a more than 50% reduction in disposable income?