I have excellent credit and have little debt. I have no trouble making my payments on my house but it is upside down. Is there anything I can do to?

Asked by Bill, 48184 Wed Jun 2, 2010

lower my interest rate? or do i have to stop paying my mortgage before the bank will work with me? I have 21 years left on my mortgage and owe 101,000. The house is worth probably 80-90,000.

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Don Tepper, Agent, Burke, VA
Thu Jun 3, 2010
You certainly can ask the bank to lower your interest rate. It's worth a shot. However, if what you're paying is already a decent rate (in the 5%-7% range), it's not too likely the bank will agree.

If you stop making your mortgage payment, you'll no longer have excellent credit. You'll also find that the bank will be reluctant to deal with you. You have no hardship (job loss, death, illness, etc.), you're able to make your payments, but you've just chosen not to. So you'd be playing chicken with the bank--either they modify your loan or they foreclose. I'm not sure you want that.

Let me make another suggestion if you're unsuccessful at getting a loan modification or doing as TJ suggests:

Do nothing.

That's right. Nothing.

Just keep paying your mortgage.

Let's say the home is worth $85,000. Now, depending on your interest rate and a number of other factors, you're probably paying off about $2,500 a year right now in principle. That's accelerating, and by about 2016 your debt will be down to $85,000.

I don't know what real estate prices are doing where you are, but what if values go up by a piddling 2% a year? That's about $1,500 a year. So in 4 years your home will be worth about $91,000 (and maybe as much as $96,000). By about 2013, you'll owe approximately $94,000. So, even with just slight appreciation and your regular mortgage paydown (now that you're in year 9 it's actually starting to matter), you'd be at break-even in 3 years.

Meanwhile, you've got a home--a place to live. You've got affordable housing. You've got good credit.

Right now, all you're facing is a paper loss. If you default on your mortgage, you'll be facing real dollars-and-cents consequences.

Hope that helps.
0 votes
T.J. Malkasi…, Agent, Grand Rapids, MI
Wed Jun 2, 2010
Bill,

I help people everyday in your situation. Just becuase your a slightly upside down, doesnt mean it's the end of the world. If you have 21 years left on your mortgage, chances are very good that it will make sense to refinance you into a 15 or 20 year fixed rate term at today's rates. The goverments passed the "Making Home Affordable Act". Once aspect of this program allows citizens who are upside down and have a mortgage owned by Fannie Mae or Freddie Mac to refinance and obtain the going market interest rates. Also, if you currently are in a FHA loan you are likely eligible to refinance through the FHA Streamline Refinance Program. This allows you to refinance with no appraisal required. The first step is to determine who the end investor is of your loan. Is it Fannie Mae, Freddie Mac, or a private investor?

FANNIE MAE: http://loanlookup.fanniemae.com/loanlookup/
FREDDIE MAC: https://ww3.freddiemac.com/corporate/

Once I determine who owns your loan I can help guide you into the correct program for your situation. Seeing as how you can more than afford your current payments we need to look at a 15 year loan.
I would be happy to discuss things with you and advise you appropriately.

TJ Malkasian
Mortgage Banker

Top Flite Financial, Inc.

P: (877) FHA-QUOTE
P: (616) 433.7066
E-mail: TJ@TopFliteFinancial.com
0 votes
Maria Morton, Agent, Kansas City, MO
Wed Jun 2, 2010
You can ask your lender to lower your rate. If they say no, you can ask other lenders what they can do for you. To find the best lenders in your area for your situation, ask your realtor.
Do not stop making your payments unless an attorney is preparing to file bankruptcy for you.
The bank will not work with you because you stop making your payments. The bank will just add fines and fees onto what you already owe.
If you stop making your payments, they will eventually foreclose which will cause heavy damage to your credit rating.
Is there any other reason you want to lose the home? Do you not like it anymore? Is it inconvenient for your life as far as getting to work or play engagements? If not, why do you care about its value at the moment? If you like the house, it works for you and you don't need to move for work, family or other reasons, who cares? If you are going to live in the same town for several more years, why not stay?
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