Question: Bob, please answer this a.s.a.p. We bought our home about five years ago with a 95 percent mortgage at a huge percent interest. When the interest rates came down, we tried to refinance but couldn't because we have insufficient equity since the house is now worth less than the mortgage.
We apparently paid too much for the house, especially since the last five years had been awesome in appreciation. When we asked our lender to reduce our interest rate to 5.5 percent, we were told the lender can't do that. Since my airline salary was cut 15 percent and my wife lost her job, we are having a tough time making our mortgage payments.
We have no intention of walking away from our mortgage obligation, but what can we do to get our mortgage lender to reduce our mortgage rate?
- Marty L.
Answer: Marty, one thing I can tell you is, it will be answered before (actually I don't know?), also, yes, you did pay to much for the house.
Most mortgage lenders won't reduce the interest rate or make other reasonable adjustments for borrowers who are current on their payments. However, if you were in default, your lender would be eager to prevent a foreclosure in a no-equity situation like yours where the lender will lose thousands of dollars by foreclosing.
If you stop making monthly payments, your lender will most likely (1) ruin your credit by reporting your default to the credit bureaus and (2) try to make some reasonable accommodation to prevent foreclosure, such as reducing the interest rate to reduce your monthly payment.
Complicating your situation is your 95 percent mortgage which probably has PMI (private mortgage insurance). The lender must consult the PMI company before making any adjustments on the mortgage. Another problem might be your mortgage may have been sold in the secondary market. If so, the S&L is only servicing the mortgage and may not even ask the mortgage owner for an interest rate adjustment.
Since you have everything to gain and nothing to lose by persisting, I suggest you write to the S&L president explaining why you need the interest rate reduction. Be sure to ask who now owns your mortgage. If it isn't the S&L, don't hesitate to directly contact the owner, such as Fannie Mae or Freddie Mac, if the S&L continues to stonewalls you. .
Q. Bob, I have just found a buyer for my home but he cannot close the purchase for three months. The replacement home that I am buying has a closing date in one month. In other words, there is a two-month lag between the time I need the cash I need to purchase the replacement house and time I will get the cash from the sale of my present home. Where do I go from here? By the way I know you are a Miami Dolphin fan, sorry!
- John R.
A. John, thanks for your concern - I normally say sorry to console someone. I went to the last game on a Sunday in 2010 and was again disappointed, thanks anyway.
Now to answer your question, this (in my opinion) is not the best avenue to take, but if you must, an experienced Realtor or mortgage broker can often arrange interim financing or what is known as a "bridge loan" for you. The money is advanced by your bank on a short-term basis with interest computed daily. Your equity in your present home is the loan security.
So if you buy before you sell, a "bridge loan" may come to your financial aid. There may be other (maybe better) programs out there ask your Realtor or financial institute.
Have a real estate question? Write, call, fax or e-mail:
Bob Jeffries, Realtor,
Century 21 Birchwood Realty, Inc.
4040 Del Prado Blvd., Cape Coral, FL