Should I Renegotiate with Lender or Try to Refinance Current

f_s_hong · Joined: 19 Jun 2008 Posts: 5 3.43 Dollars($)

I have a 5 year interest only ARM at 5.5% for the first mortgage of $452,000. The ARM will adjust in 10/2009. Second mortgage $59,000. When the ARM adjusts we will have difficulty with the payments. We have made payments on time and have not miss one yet. The value of our home listed on zillow.com is $551,000.

Should I try to renegotiate the terms with the lender or should I try to get a refinance to another 5 year arm. Does the lender charge you closing cost and fees for renegotiating the terms? What is the benefit of one over the other. Any advice would be greatly appreciated.

Thanks
F

larry · Joined: 27 Jun 2007 Posts: 3328 473.51 Dollars($)

Hi.

Welcome to the forum.

I think you should first try to renegotiate with the current lender for changing the terms and condition of the loan. If he agrees to change the terms and conditions then he may charge you less fees. If he don't agrees with the terms and conditions then you can shop for other lender to refinance your current loan. But I think you need to act fast because it will take time Smile

Feel free to ask if you have any further questions.

Best of luck,
Larry

Jeanette · Posted: Thu Jun 19, 2008 2:22 am Post subject:

Hello Fs Hong,

Since your 5 year ARM is about to expire next year 2009, yes you should start considering refinancing to a fix or another 5 year ARM.

Renegonitating the term or the best program for you right now is key. The rates for a fix and an ARM loan are very close in todays market. You should try to get into a 30 year fix or a 25 year fix if you can manage the payments. The lender does not charge to renegotiate the terms but you will be paying closing costs whether you refinance 30 year fix, or 5 year ARM.

The benefit between a 5 year ARM and a 30 year fix is :

A 30 year fix will offer you the same payments for 30 years
the 5 year ARM will adjust rates and the payments will increase

These days the 30 year fix have lower rates than the ARM
so the payments will be similar.

Thus, there is acutally no benefit to carry a 5 year ARM loan today but disadvantages.

Talk it over with your lender/broker before you make a decision. We have excellent lenders in this community. You can even get a quote by clicking on the link provided.
http://www.mortgagefit.com/quote/

Good Luck,

Jeanette Smith
Mortgage Planner
Union Mortgage Group

f_s_hong · Joined: 19 Jun 2008 Posts: 5 3.43 Dollars($)

Since I am not delinquent with my payments, how likely is my current lender willing to renegotiate? Usually how long does it take to renegotiate with the current lender?

larry · Joined: 27 Jun 2007 Posts: 3328 473.51 Dollars($)

Hi,

It is not that you will have to be late on you payment for the renegotiation with your current lender. But he may not be willing to change the terms and condition just before the rate adjustment. But you should at least talk with lender to check it out.

Best of luck,
Larry

cliff · Posted: Thu Jun 19, 2008 7:01 am Post subject:

Hello FS Hong,

Yes, take action now and contact your lender. You do not have to be delinquent to request a workout plan from your lender. You will need to provide them with an explanation of the hardship you are facing, and your current financials/expenses. They will review these items and determine if you qualify for any type of workout. You won't qualify for a repayment plan because you are not currently behind. But they may determine that you qualify for a loan modification.

At the same time that you are requesting a review for loan modification, be sure to state that you need to be on a fixed rate, etc. Remember, you have to tell them what your needs are. Be specific.

The lenders will usually tell you that a review for loan modification, and its approval, may take 30-45 days. In some cases, the new workout plan can be completed much sooner. But you need to be sure to still make your current payments on time throughout the process.

I certainly hope you are able to achieve a good outcome. Visit home-buddies.com and review the free step by step guide for mortgage problems.

Good luck.

Jeanette · Posted: Thu Jun 19, 2008 7:50 am Post subject:

We will encourage you to refinance and renegotiate, but also shop around. Maybe you will get a better program with a different lender. Lenders operate differently so you just need to contact your lender and find out if they will renegotiate a loan and how do you qualify and the costs. Dont just renegotiate with current lender, shop around for the best program out there with other lenders. You will need a period to shop around and find the right loan so starting three to six months prior to end of 5 year ARM would be beneficial. You also want to refinance and close, the 30 year fix or 5 year ARM, right at the end of the current 5 year ARM term to avoid any prepayment penalty. The lender you work with explain in more details the prepayment penalty for your understanding.

We wish you all the best with your new loan program and inform us on how everything went.

Thanks,

Jeanette Smith
Union Mortgage Group

Do your homework and compare what the lenders have to offer, and you will be fine.

cliff · Posted: Thu Jun 19, 2008 10:24 am Post subject:

I agree with Jeanette, however, if you go with another lender there will be closing costs, etc.

But our experience is that with those homeowners who are experiencing difficulties with their mortgages, the government is putting more pressure upon the lenders to take ARM and fix them as 30 year terms.

Also keep in mind that online appraisals are not accurate. And so you will want to confer with an independant appraiser in your area to get an accurate appraisal for your protection and benefit.

Jeanette · Posted: Thu Jun 19, 2008 10:46 am Post subject:

Renegotiating a loan has fees but significantly lower than refinancing costs. The rates, on the other hand, for renegotiating a loan are higher than a refinancing rate. That is why you should look at all your options and compare. You have to start over your term either way, so compare before you decide.

Jeanette

0.10 Dollars($)

With all the indicies at such low levels, how come you'll have a problem when the ARM adjusts? Is it just the P&I hit? You knew this going in and rates (assuming there wasn't a big teaser) have gone your way. Why should the lender "feel sorry" for you and renogatiate? You make your bed; lay in it.

0.10 Dollars($)

Thank you for all the advice. It is much appreciated. I will be contacting my current lender once I gather all my documents. I have spoke to a loan officer to see what my other options are.

F

cliff · Posted: Fri Jun 20, 2008 9:06 am Post subject:

Good luck and if you have any other questions do not hesitate to ask.

f_s_hong · Joined: 19 Jun 2008 Posts: 5 3.43 Dollars($)

I got all my documents and information gathered. I am going to call my current lender to renegotiate the terms however I am not sure what to say or where to start. Any advice would be much appreciated.

Thanks,
F

larry · Joined: 27 Jun 2007 Posts: 3328 473.51 Dollars($)

Hi.

Welcome back.

You just need to inform the lender that you want to refinance the present mortgage but why are you willing to go for 5 year ARM. If you are considering to stay here for a longer period of time then I would suggest you to go for 15 year or 30 year FRM. I think that will help you in the loan run.

Best of luck,
Larry

cliff · Posted: Wed Jun 25, 2008 5:49 am Post subject:

Do you mean you are going to workout new terms with your existing lender? This is important for me to know that way I will know where to direct you.

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