Converting from ARM and Upside-Down

Guest

Hello,

I'm sure I'm in the same situation as other fine folks, and I'm going to try to explain this clearly but I'm not completely knowledgeable about the mortgage terminology and procedures. A quick disclaimer; I'm a novice at understanding this stuff, but I can't afford to be anymore, so forgive me, but my questions could be common sense for those of you with more experience.

We have an ARM at 5.75 that will need to be converted to a 30-year fixed this year, and when we bought our house in 2005 it was for $210,000. With the economy issues, we're not sure what it will appraise at this year but we fear that it could be in the $180,000 to $190,000 range (we currently owe about $200,000).

My question is about how the refinancing works; I've seen people in these forums mention that the lender won't "go over 100%" of the home's value when refinancing. Does that mean that the lender won't go over 100% of the appraised value? Meaning, in our case, that we would need to come up with the difference between what we owe and the appraised value? If so, do they just say "You owe us $20k today" or are there options for us?

Any info you can provide will be greatly appreciated. Thanks!

jameshogg · Posted: Sun Feb 15, 2009 9:32 pm Post subject:

Hi dlt,

Lenders are ready to refinance a property if there is some equity in the property. It is good to refinance a property if you have at least 10% equity on it. But if you owe more than the market value of the property then lenders won't refinance.

So first you will have to go for a property appraisal and check if you have equity on it. Then you can proceed to refinance the property.

Thanks

Guest

Thanks jameshogg,

So if I'm unable to refinance, then do I just keep making payments all the way through and past the ARM adjustment, and then refi to a 30-year when I can? Or will there need to be some type of refi/closing process on the day the ARM adjusts?

NOTE: I was able to find out that my ARM adjustment date is 10/1/2010, and that our margin will be 2%, but I haven't been able to get the index because of the holiday.

Niicss · Posted: Tue Feb 17, 2009 2:11 am Post subject:

Hi dlt,

If you are unable to refinance the loan, then you will have to make the payments according to your existing terms and conditions. You will not have to pay any kind of closing costs when the ARM adjusts. The lender will just inform you about the new rate according to which you will be making your payments.

Thanks.

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