Q:
Like many of our neighbors in Las Vegas we refinanced our home mortgage 3 years ago and paid off credit cards. We accepted a less than interest only payment plan where the balance of our loan increased each month and now the total is well above the estimated value of the home. As the reset date approaches we have attempted to refinance into a fixed rate, we can afford a higher payment, just not the higher rate current mortgage. We would have to come up with about 35,000 as the appraisal is 250,000. Our credit is very good, all are bills are current, and we own our cars. Do you have any advice? I don’t feel we were deceived; just victims of circumstances. Any help would be greatly appreciated,
A:
Although negative-amortization loans have received a bad rap in the aftermath of the mortgage meltdown, in reality they are an excellent cash management tool in the hands of a borrower who understands how the loan works.
I assume that your monthly payment statement gives you 3 payment options:
1. A minimum payment (e.g. 1.0%)
2. Interest-only payment
3. A fully-amortized payment.
Option 3 is based on the full interest rate, and in any month that you choose that option, your mortgage balance will be reduced. Now, if you were successful in refinancing your loan, I doubt that your new interest rate or payments would be that much different than what option 3 is already giving you.
Unless your lender is willing to allow a loan modification, your best bet might be to stay with the current mortgage.
