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pshigeno · Joined: 13 Apr 2009 Posts: 1 1.51 Dollars($)

I purchased a home in 2006, for $300K, with the combination of an interest-only first mortgage ($240K), a second mortgage ($30K) and a down payment of $30K. The interest-only first mortgage interest rate increases significantly in 2011.

I estimate the current value of my home to be between $230K-$240K and have talked to one bank that suggested that this was high (they said $210K). Because it was an interest only loan, the balance on my first mortgage is $240K and the balance on my second is $22K.

While I can afford the payments today, I am worried about being able to afford the new payments when the interest rate increases. Also, since it's an interest only loan, I'm not paying off any principal on an asset that is severely depressed. I don't have an emotional attachment to the house, so I'm just trying to be proactive to avoid a severe hit to my finances.

I have good income and great credit.

I would like to get out of my current mortgage in the most cost effective manner possible, thinking of both short-term and long-term costs. It seems like all the programs and solutions are designed for people on the verge of foreclosure. And I've tried multiple times to speak with someone from my mortgage company, but they are not interested in speaking with me as I'm still current on my mortgage.

I'd be interested in hearing thoughts on what you think my best options are.

smckaybiz · Posted: Mon Apr 13, 2009 6:09 pm Post subject:

Hello and welcome to the forums,

I think you're best bet at this point is to just ride the housing market and wait until your value increases enough that you can either refi both your 1st and 2nd into one fixed rate loan( Principal and interest!!!!) If your income is very good than you should be able to handle the higher rate when it comes, even if it means you'll have to drive a crappy used car as opposed to the new one you might want.

Either that or just simply try to sell the home for what you can and use your great credit to take out a personal loan or line of credit to pay the remaining balance.

I know it seems harsh but I can't think of anything else for you to do besides allowing yourself to get behind on your mortgage and ruin all that you've worked so hard for by destroying your credit. Then you may be eligable for some assistance.

I just don't understand why someone would buy a home with an interest only loan??? Why not just rent or lease. Atleast then you don't have to worry about taxes, ins, and upkeep. The fact of the matter is that if you can't afford to take out a traditional mortgage where your payment is being applied to both your principal and your interest than you probably really can't afford that house...

I wish you the best of luck pshiqino, let us know how it goes.

smckaybiz · Posted: Mon Apr 13, 2009 6:11 pm Post subject:

Oops! incase you couldn't tell only the (principal and interest!!!!) was supposed to be bold and underlined. I hope you all don't think I'm yelling at everyone. Shocked

Realgeni · Joined: 13 Apr 2009 Posts: 1434 99.76 Dollars($)

If you can show somehardshipto the bank, they may look at your application and change the interest rate.

Get all your monthly expences and call them. They will review it and if ti helps.

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