Keeping Your Mortgage Above Water
Keeping Your Mortgage Above Water - In the next couple of years, a combination of rising mortgage interest rates and falling home values could plunge thousands of homeowners underwater.
Being underwater means owing more than the house is worth. Also known as “being upside-down”, it’s an especially risky situation for people with interest-only mortgages or pay-option adjustable-rate mortgages, AKA negative-amortization type loans.
Some homeowners may be able to refinance or get through hard times by simply adjusting their life styles and living much more frugally. Others, however, will have to sell their homes, possibly at a loss. And still others will lose their homes altogether to foreclosure.
If you have an Interest-Only or Pay-Option ARM, assess your situation and, if you conclude that youre home is in jeopardy, act quickly!
The two groups of homeowners most at risk may be:
1) Those who are making the minimum payments on Interest-Only mortgages obtained with little to no down-payment (10% or less) in the last year or two in markets where house values are falling.
2) Those who are making minimum payments on their Pay-Option Adjustable rate mortgages, or Negative-Amortization home loans, obtained with little to no down-payment. Pay-option ARMs are Adjustable-Rate mortgages that allow borrowers to decide how much to pay each month. The danger being that, in most cases, the minimum payment doesnt even cover that months interest, so the loan balance rises and erodes your homes equity even faster.
Sooner than later, the minimum monthly payments on these loans will increase abruptly, past the point of comfort for many, and past the point of no return for many more.
If you fall into either one of these two groups, call us at 415-617-5448 right away so we can determine the severity of your situation and begin exploring your options.
A lot of people are only now realizing their predicament. For many, the time to refinance is now, if possible; those already underwater with no cash to spare unfortunately have very limited choices.
Borrowers who need to defer interest but are afraid of the rising adjustable rate on their option ARM loan may consider obtaining a fixed rate mortgage with similar payment options, but more predictable negative amortization characteristics.
Programs and guidelines are constantly changing in this industry, so to keep your mortgage above water, don't wait to refinance your mortgage. If you see yourself upside down, call a mortgage broker immediately at 415-617-5448 and take advantage of the few 125% programs that are still around.
If you find yourself in a situation where you owe more on your mortgage then your home is worth and you have a adjustable rate mortgage you can still refinance. There are programs availible that allow you to refinance up to 125% of the value of the home. These programs will carry a higher interest rate but will also over time help you regain some equity in your home and have the stability of a fixed rate mortgage.
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