Posted on: 22nd Jun, 2009 08:43 am
my wife has a morgage in her name only of 300,00 and a second morgage of 72,000. our current home value is around 275,000 and we have a 5 year intrest only ballon loan with 2 1/2 years left. i have heard that if you stop paying your 2nd morgage and keep current with the first that they will settle the debt for for pennies on the dollar. this would put my home value about what it should be. would this make trying to refinance the 1st morgage difficult with the ballon expiring?
i believe that the second mortgage will automatically become the first mortgage when you pay off the first mortgage at refinance. the second mortgage lender would have to agree in writing to a continuation of subordination. it's not realistic to default on your second mortgage and qualify to refinance on your first. a better option is to consolidate or to refinance both loans into new separate loans (probably need to find a new lender for the second mortgage). if you're not trying to sell, the thought process is that the housing market will bounce back and your home equity will return to its value.