I’m sorry to hear about your housing troubles. While your idea of giving your house back to the bank may sound unconventional, there is a way you can theoretically do what you are asking about. When you give your house back to the bank, it is called a “deed in lieu of foreclosure.” As you might expect, you cannot simply give it back and move out and call it good; you need to get the bank to agree to your decision. A deed in lieu is very formal, and ends your relationship with the bank, giving you a clean slate to work with.
When you get a deed in lieu on your house, you agree to forfeit all property rights, and you give up your investment in the property, transferring full ownership back to the bank. The bank then forgives you the balance on your mortgage, and you walk away and never look back. For some homeowners, this is not the best course of action, but it may be for you, if what you need most right now is a fresh start. Ask yourself what is most important to you. If a clean slate could change your life for the better, a deed in lieu may be the perfect option—assuming that is that you can get the bank to agree to your proposal.
It isn’t always easy or even possible to secure these deeds; banks rarely want to part with money they think they have coming to them. You are trapped in your mortgage until they let you off the hook, and if they believe you can continue to pay, even if you do not wish to, they will continue to charge you. Sometimes, however, banks will grant a deed-in-lieu in order to avoid expenses related to litigation and other complications. If you can convince them that you truly cannot pay, and that the alternatives will be costly (to them, of course), you may succeed.
To try and get a deed in lieu, begin by placing your house up for sale. You have to actually be a candidate for foreclosure to be a candidate for a deed in lieu; the bank will not consider it if you are current on your mortgage, even if you know you cannot afford to keep paying. If you are actually behind more than 30 days, your request is more likely to be taken seriously. If you are current on your payments, should you slip behind on purpose? It will be a serious knock to your credit, and you will be steering into very treacherous seas with the bank. But if you are certain that your current lifestyle is unsustainable, and you know you will fall behind soon on one thing or another, you may want to make a calculated choice to pick the mortgage instead of another payment. Again, be very cautious about this. Usually it is better to try and save your home, but it may not be possible.
After you have placed the house up for sale (and assuming you are behind on your payments), call up the bank and talk to a mortgage loan officer, explaining you are behind on your payments and cannot afford to stay in the house or pay on it. Make it crystal clear that your remaining in the house is bound to be unprofitable for them. Explain that you are seeking a deed in lieu of a foreclosure.
The bank may or may not attempt to negotiate you down another path like loan modification. If such a path interests you, by all means, pursue it. If not, do not allow the bank to steer you from your course. Follow up the conversation with the loan officer with a letter to the bank iterating the same request for a deed in lieu. Include documented evidence of your financial inability to pay the mortgage. The more disastrous the circumstances preventing you (medical bills, unemployment), the more effective you are likely to be with your letter (just make sure you stay honest and do not make up nonexistent circumstances). Request a face to face meeting at the end of your letter. This is where you will have your best shot at getting what you want.
At the meeting, make your case firmly once again. Make sure you have calculated why it would be to the bank’s benefit and not just to yours to accept your offer (always think in terms of concrete numbers). If the bank accepts the deed in lieu, you will have to sign paperwork and be out by the date the bank gives you, so be prepared to get out of the house fast.
The deed in lieu has a couple of other benefits beyond the clean break; it will damage your credit, but less than a foreclosure would, and it will also have fewer tax drawbacks. Note that if there are any liens against your home or home equity loans or additional mortgages, you will not be given a deed in lieu until the house title is in the clear, so try and take care of those first, if they are applicable to your situation. Stay firm with the bank through the entire process, because they will try again and again to deflect you. Good luck making your case and moving on with your life.