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Chliu3 · Joined: 22 May 2009 Posts: 4 2.67 Dollars($)

I have an interest-only 5/1 loan (still owe 405,000) with Chase. My house worths about 250-300K according to the recent sale. Because I have to move to another city for a new job, the house is rented now. I will have to lose about $10,000 per year to keep it. I don't have a major hardship to pay the interest right now and I might be able to pay when 5/1 term ends. I don't want to keep losing money for a house I can't even live in. I wonder whether the bank will consider to lower the principle to help me to keep the house. Or maybe I will have to just walk away. Any comments is appreciated.

jenkin7 · Posted: Wed Nov 18, 2009 10:51 pm Post subject:

Hi Chliu,

It is unlikely the lender will approve a loan modification until you can prove you are facing a major financial hardship. A reduction in the principal loan amount does not seem to be likely in this situation. But losing $10k per year to keep the property does not make sense either. If you walk away from the property it will seriously affect your credit.

Have you thought of selling the property through owner financing? You can offer potential buyers a rent-to-own type of financing. They will keep paying monthly rent, which you can use to make the monthly mortgage payments. After a certain number of years, the buyers can refinance the mortgage and get the full title to the property. This will be a good option for both you and the buyers. The buyers will not have to qualify for a mortgage loan immediately to buy a home and you will not have to take a hit on your credit by walking away from the property.

Guest

I heard a story from one of my previous colleague about bank could compromise with you sometimes. He owed the bank about 400k initial loan and then take out another 200k from the home equity line. He didn't want to pay back when the market was down. So the bank let him go with 100k cash pay back only. I wonder if I could also offer 80-100K as down pay, would they allow me to refinance the home to the current market value and it will be good foe both of us. Do you think that is possible? Thanks in advance.

savior70 · Posted: Fri Nov 20, 2009 5:07 am Post subject:

Hi,

You can negotiate with the bank and get them to accept a short payoff on the loan. But a lot depends on your individual lender and your particular situation. Your colleague had been able to get the bank to accept a short payoff. But it does not necessarily mean your bank will also accept an amount less than what you actually owe them. But you can surely give it a try. You can also check out the option of short refinance. The lender may allow you to refinance the home at the current market value and pay off the existing debt with the proceeds of the short refinance.

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