Posted on: 12th Jul, 2008 06:38 pm
hi all, i've got a question about my mortage. we own (live in) a house on the missouri side of kansas city with a first and a second mortgage. the first is an arm and the second is fixed, they are held by the same company which purchased them from the original lendor. the arm is due to reset in may 2009 and will raise my payment about $850 a month which we can't afford.
here's the (big) problem, we owe about $350,000 on both mortgages ($305,000 on the 1st and $45,000 on the 2nd) but our house will only appraise for $310,000 maybe $320,000.
our combined income is $100,000 a year (salaried) and our credit score hovers around 750 with all the reporting agencies. i've got about $5,000 in cash and another $12,000 in a cd that is set aside for my son's college. in over 12 years of credit history we have had no judgements, bankruptcies, foreclosures, collections, back child support, tax liens nor have we ever had a late payment on anything.
we pay about $700 a month in credit payments and $550 for 2 vehicles.
what are my options for getting out of this mess? i only want to refi to get out of the arm, i have no intentions of trying to skirt what we owe.
thanks for any help!
here's the (big) problem, we owe about $350,000 on both mortgages ($305,000 on the 1st and $45,000 on the 2nd) but our house will only appraise for $310,000 maybe $320,000.
our combined income is $100,000 a year (salaried) and our credit score hovers around 750 with all the reporting agencies. i've got about $5,000 in cash and another $12,000 in a cd that is set aside for my son's college. in over 12 years of credit history we have had no judgements, bankruptcies, foreclosures, collections, back child support, tax liens nor have we ever had a late payment on anything.
we pay about $700 a month in credit payments and $550 for 2 vehicles.
what are my options for getting out of this mess? i only want to refi to get out of the arm, i have no intentions of trying to skirt what we owe.
thanks for any help!
Welcome ecprince,
Question: Have you had any late payments since the loan opened?
You have nearly a year before the loan resets so I'm not sure the lender will negotiate yet. What you may want to do though is make several more on-time payments & then soon after Christmas let the lender know that when the loan resets you will not be able to afford the payments. Ask if they can convert the loan to a fixed rate or at least keep the interest rate at the current %.
It's worked in the past!
Question: Have you had any late payments since the loan opened?
You have nearly a year before the loan resets so I'm not sure the lender will negotiate yet. What you may want to do though is make several more on-time payments & then soon after Christmas let the lender know that when the loan resets you will not be able to afford the payments. Ask if they can convert the loan to a fixed rate or at least keep the interest rate at the current %.
It's worked in the past!
Id have to agree since there is some time for you to wait you can continue making payments. Who knows by May 2009 market might rebound some and then you could even try for an FHA loan if your house appraises. If not you can always try negotiating with your lender. There may even be new options by that time. Things change on daily basis in mortgage industry nowadays.
There may be an option now. If our lender on the 2nd will subordinate you can do a new 1st with FHA (no more than 97% of the value)
FHA does not care about combined loan to value just what their share is...
The problem is most 2nds have stopped granting that request.
It is worth a shot?
Good Luck
Brian
FHA does not care about combined loan to value just what their share is...
The problem is most 2nds have stopped granting that request.
It is worth a shot?
Good Luck
Brian
brian's scenario is sensible, but the key element of course is the second mortgage holder's agreement. if that isn't present, you're back where you began; but lynnette and eugene have both made good points, in that you'll be in a good position to bargain with your first mortgage lender in an effort to reduce the damage the adjustment is scheduled to have on your finances.
you're in good position because of your payment habits, your existing score, etc. i don't believe the overall market will make a comeback, thereby enhancing your case in terms of equity in the home, but by all means, do what you can to bolster your case when you go ask for some sort of capitulation on the part of your lender.
you're in good position because of your payment habits, your existing score, etc. i don't believe the overall market will make a comeback, thereby enhancing your case in terms of equity in the home, but by all means, do what you can to bolster your case when you go ask for some sort of capitulation on the part of your lender.
wow great discussion!
all the posters have given you sound advice. if the lender on the second will not subordinate then your only option will be to negotiate with the second to change the mortgage to a fixed rate.
also, congress more than likely will have passed legislation that would directly affect your loan http://money.cnn.com/2008/07/11/news/economy/senate_housing_vote/index.htm?section=money_news_economy. with this new legislation you could refinance into a new loan at 90% of the appraised value of your home. your lenders take a write down on these loans and you get a new fixed rate mortgage without any harm to you.
hope this helps. :d
all the posters have given you sound advice. if the lender on the second will not subordinate then your only option will be to negotiate with the second to change the mortgage to a fixed rate.
also, congress more than likely will have passed legislation that would directly affect your loan http://money.cnn.com/2008/07/11/news/economy/senate_housing_vote/index.htm?section=money_news_economy. with this new legislation you could refinance into a new loan at 90% of the appraised value of your home. your lenders take a write down on these loans and you get a new fixed rate mortgage without any harm to you.
hope this helps. :d
Just a visitor here, but I am a mortgage originator in Iowa. I have a question- how do you know already what your 2009 ARM re-set rate will be? Are you positive your payments will go up that much? I have had some clients lately whose ARMs have reset in the past several months and their payments did not go up very much, buying them more time before a refinance. (Their ARMS were based on the index of the weekly average of 1 yr treasuries plus a margin.) Also, if it turns out you do need to refinance and your LTV is an issue, it may be possible for you to pay off or pay down the second mortgage by taking out a secured loan- possibly secured with a vehicle , or your CD's. Just some thoughts.
Hi Bailey.
Welcome to the forum.
So you are a mortgage originator in Iowa. Good to see you here in this forum. I have a question here to you. With ARM rate adjustment the rate is going to be increased right? May be not much but it more often than not the payment is going t be increased. But does it sometime decrease?
BTW have you seen the mortgage Professionals section here? Please take a look at http://www.mortgagefit.com/community/professionals.html
Hope to see you on the forums.
Best of luck,
Larry
Welcome to the forum.
So you are a mortgage originator in Iowa. Good to see you here in this forum. I have a question here to you. With ARM rate adjustment the rate is going to be increased right? May be not much but it more often than not the payment is going t be increased. But does it sometime decrease?
BTW have you seen the mortgage Professionals section here? Please take a look at http://www.mortgagefit.com/community/professionals.html
Hope to see you on the forums.
Best of luck,
Larry
Hi Larry,
I have had clients whose ARM rates actually adjusted DOWN- just depends on the index that is being used for the ARM product.
I will check out the mortgage professionals section - Always more to learn in this business!
I have had clients whose ARM rates actually adjusted DOWN- just depends on the index that is being used for the ARM product.
I will check out the mortgage professionals section - Always more to learn in this business!
hi Bailey.
Welcome back.
In the mortgage professional section, you can find so many professionals like you who are helping. So I think you can also be one of them and your knowledge and experience will be helpful for the people who comes here with problems.
Hope to see you on the forums.
Best of luck,
Larry
Welcome back.
In the mortgage professional section, you can find so many professionals like you who are helping. So I think you can also be one of them and your knowledge and experience will be helpful for the people who comes here with problems.
Hope to see you on the forums.
Best of luck,
Larry