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Figuring, Both Buyer and Seller in Excelsior, San Franc...

If I have cash, is it wise to pay it towards principal to get a better mortgage on my underwater home?

Asked by Figuring, Excelsior, San Francisco, CA Tue Feb 2, 2010

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Well this is a tough one. There are a couple of options for you to explore and each option will have it's pluses and minuses.

1. Loan Modification. Depending on the lender(s) holding your mortgage a loan modification might be a potential possibility. Typically a hardship package is required and the process can be lengthy depending on the lender you have your mortgage with.

2. Refinance. Depending on how far underwater you are and how much cash you have on hand, you may be able to refinance. You may trying to approach the lender that currently holds your mortgage. You may be able to negotiate better terms to your loan that will help you to reduce you monthly payments.

3. Leave everything the way it is. If you have a significant amount of cash on hand, have a contignecy fund (10-12 months of salary) saved is never a bad idea. If your current loan has a reasonable rate and you are able to make your payments, this may be the best option. The one thing that is for sure, the market will change again, and if you are currently in a position where you don't need to refiance and are able to ride out this downturn in the market, then you may be better off in the long run. If you are in a position to do so, you can also try to shorten the time paying off your loan by making 1 extra payment a year. You can apply this toward the pricipal and this can help you, over time, increase your equity.

You should consider conslting your CPA or Financial Planner to understand how to best leverage your cash to help you.

Hope this helps!

Lisa Cartolano
Alain Pinel Realtors
1 vote Thank Flag Link Tue Feb 2, 2010
I'm by no means a financial planner, but I will say this. Once you pay down the principal, that money is gone...until you sell the home. If you are planning on staying in the home into your old age (or at least for the long term) then it might make sense. As with any refinance you'll want to compare the cost vs. the benefit and see how much you'll save over the long term. Also, you'll want to examine the aspect of "opportunity cost" - that is, if you "invest" a large chunk of cash so you can save 1% or 2% on your mortgage, do you lose an "opportunity" to make a larger return on that cash?

All good questions that a good financial planner can help you with

Best of luck
1 vote Thank Flag Link Tue Feb 2, 2010
This would depend on several things, including how much cash and how much better the terms of your mortgage would be. How long would it take to make your money back via monthly savings? The most important thing is whether you see yourself living there for a long time. If you plan on moving within a few years anyways, it probably isn't a good use of your liquid assets.
1 vote Thank Flag Link Tue Feb 2, 2010
I was just looking through old post and I noticed yours. If you were not able to refinance at the time of the post, I can certainly help you out now. You can call me at 408-352-5147 or email me at You can check us out at I will look at your situation and present you with some options.

Alex Greer
NMLS #1056079
0 votes Thank Flag Link Thu Aug 15, 2013
Before a CPA and/or Broker/Agent can form an opinion the following missing pieces to your puzzle need to be answered.

How long have you owned your house
Have you refinanced since you purchased
How many loans do you have on the house
What are the balances, interest rates, and terms of the/those loans
What is the market value of your home today
How long have you been at your current employer
Are you self employed
Is this an owner occupied home or an investment
Can you afford to pay the mortgages
Is your job stable
What is your ultimate goal

As you may see your answer to these questions will form a clearer picture. If you need a referral to someone in your area to assist you through this feel comfortable to email or call me.
Web Reference:
0 votes Thank Flag Link Sun Feb 7, 2010

The answer to this question depends on a lot of variables - your current mortgage, how upside down you are, what your long term plans are with regards to staying in your current neighborhood, and price trends in your area to name a few. I would consult a CPA and a Real Estate Broker for a combined knowledge base to help you make that decision.

Best Regards,

Lance King/Managing Broker
DRE# 01384425
0 votes Thank Flag Link Tue Feb 2, 2010
I tend to say no unless it lowers your payments. Today, cash is hard to come by and it seems prudent to hold onto cash in the case of losing your job or other problem that you may need money for. I suggest you invest the money in a financial product which would give you a return.
I think a financial planner such as Karl Von Brodckdorff at Ameriprise might be able to help you. His number is 415 743-9884.
0 votes Thank Flag Link Tue Feb 2, 2010
Hello Bob,

Before I could give you a good answer, I would have a few more questions. If your current mortgage rates are high and you want to take advantage of the current low rates, by all means, re-finance but ONLY if you plan to be in the house for at least 3-5 years--or longer.

If you have difficulty with your current payment, a loan modification might help.

As a last resort, you could sell the house by doing a short sale IF you are upside down. However, if you have verifiable liquid assets, this would be problematic.

Just need to know your motivation and long-range plans. In the long run, you will NOT go wrong having equity in your home and can get a home equity line or reverse mortgage down the road should you need money/income.

Hope this helps.

Warm Regards,
Rebecca White, GRI

Keller Williams Realty
The 3rd Largest Real Estate Company in North America
0 votes Thank Flag Link Tue Feb 2, 2010
Hi Figuring,
I would suggest you consult a CPA ASAP.
While I cannot give financial advice I can give an opinion that you should really verify this with your CPA but does it make sense to pay down a loan when the house is upside down? Other questions your CPA may want you to answer are, was the loan all purchase money? Or did you refi and take money out along the way.

Harold Sharpe
So Cal Homes Realty
(951) 821 8211
0 votes Thank Flag Link Tue Feb 2, 2010
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