I have to agree with Mr. Tepper and Mr. Charest. Sit on it and sell later. Are you really going to spend $12000 to lower your second mortgage payment? Really? Do you have other debt that you can look at paying off to help offset the second mortgage payment difference? In other words, the difference between what your paying now (about $900) versus your new payment at 5.5% ($500) is about $400. Is there another debt (car loan, credit cards) that you could pay off instead to offset $400 a month and leave that thing alone? So many people jump to refinance, when in fact the reason they are hurting is because of other debts (maybe that's not you). But, before you start trying to kill yourself to accomplish the near impossible, look at making an extra $400 a month or cutting $400 a month from your budget. I'm guessing you have an FHA loan on the first. FHA doesn't go to 125% as Mr. Tetloff mentioned (by the way his idea is good...however)...The new 125% comes at a price. About 3 discount points. Let's see, that's $225 times 3% plus 3% in closing costs ($12000). That's a lot of money. Yes, they'll shave a half point discount if you take the loan to 25 years vs 30 years.

Hi Gerald,

You are currently at 72.2% Loan to value (1st Mortgage divided by home value) and 121.4% Combined loan to value (1st mortgage + 2nd mortgage divided by home value).

I would suggest you call the lender on your 1st mortgage and request a "loan modification" (***i say this making a lot of assumptions***) and maybe hit up the lender on the 2nd mortgage too... My advice is to be persistent.

I have spoken to many people who have told me how they were told "NO" 3x's in a row but they kept calling and finally had someone help them.

I wish you the best,

Carlos

Hi Gerald. I can tell your a little frustrated. I read the responses below and they are reasonable and with merit! However, there might be another option for you. Both Fannie Mae and Freddie Mac have refinancing available for first mortgages and your total loan amount can't be over 125% of the current value. As I whipped out my calculator, I realized your value at 125% is $225,000. You owe $218,500. If your mortgage is owned by Fannie Mae or Freddie Mac ( they own about 70% of all mortgages) you could qualify for this program to lower your interest on your 1st Mortgage. The 2nd mortgage would have to resubordinate their 2nd lien position to stay a second mortgage. You could also try to negotiate a lower interest rate on your second mortgage too. Trust me when I tell you, second mortgage lien holders are really nervous right now due to high default rates, they should be more than happy to help you.
I hope you find this information helpful and if you need further assistance in finding out if you qualify or how to get the information, just let me know. I left Fannie Mae's website for you to check if they own it below. Good luck!

Nothing.

Well, as Terrence suggests, it'd make a lot of sense to somehow get rid of that second mortgage. If you can do it, which I'm betting you can't.

So, what you do is live in the house. You make your monthly payments. And that's it.

At some point, real estate values will rise and you'll have some positive equity in the home. Meanwhile, you're slowly paying down the principle on the loans. All your current situation means is that you wouldn't be able to sell the property for what you owe on it today. So: Don't sell. Just live there. Make your payments.

Hi Gerald, if you do plan on staying in the home and refinancing, I would recommend contacting the lender that holds your first mortgage. They can probably do a MHA (making housing affordable) loan for you to get the rate down to the 5%'s (as long as your credit is good). If the same company holds your second loan, it would be even easier, as the 2nd loan could be easily subordinated. As Terrence suggested, definitely do what you can to pay off that 2nd mortgage, as the interest rate is obviously too high. Home values will bounce back over time, but definitely not how they increased before.

It depends on what you are looking to do. If you have been in the house long enough, you may be able to refinance. If you don't plan on selling but are concerned you have lost value, you are not alone. Eventually the market will come back around, but no one can say when or how long it will take. If you are unable to make your payments, then you may be able to do a short sale. You must be in a hardship position in order to go that route though.

Tighten your belt and get rid of the 2nd mortgage loan. Second job in the family. Anything you can do to pay the second down. You won't be able to refi if your property is currently worth $180K.

That's about the only suggestions I would have.

Terrence Charest