We Have Not Recovered Since Our 125% Home Loan. – Ryan

“Dear Steve,

My wife and I racked up credit card debt in college and the few years after college, they compounded by increased rates and as young adults are prone to do several late and over limit fees and don’t have money for the bills put it on the card.

Then we became professionals making decent salaries and had bought a house with a 6% mortgage. As the debt made our decent salaries seem like we were at poverty level (no money after paying bills) we went with a refinance program company named New Day Financial who allowed us to do a 125% refinance on our mortgage resulting in a new mortgage at 8% and a second mortgage at 14% and closing costs again. It all seemed good at the time since we were desperate and wanted to start a family. And the plan proposed by New Day Financial was to revisit in a year to get the rates back down. This was before the housing crisis and now they tell us that the programs that they were hoping to use for us don’t even exist any more, they couldn’t have foreseen the housing crisis, yada yada yada.

Long story short our debt is really bad. Our current credit cards that the second mortgage of $35,000 have not covered have ballooned to another $35,000. I have talked with all of our creditors and gotten them to either give us better rates, special payment plan, temporary plan, whatever they will give me basically. I got some lower rates, some for 5 years, some for 3 months, some gave me squat. I have scaled down all expenses, sold everything that I can and we are serious about getting out of debt. But if there are any other things I could be doing or if there is any new programs or legislation out there that I don’t know about or just any information or literature would be greatly appreciated. Thanks for your time.

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Is there anything else I could be doing either in the short or long run. Any info or advice would be greatly appreciated. Again, thanks for your time.


Dear Ryan,

The best solution is going to be one targets the goals you want to meet. Solutions range from staying on the long path you are on now to considering a Chapter 13 bankruptcy where the second mortgage could be crammed down to the value of the property and a repayment plan for the cards could be created at 0% interest.

Are you trying to pay a penance and make amends or rescue your lives and get a fresh start?

What concerns me is that your debt elimination plan currently does not include and money to build up an emergency fund or save cash. You may have cut things so close to the bone and sold everything in your desire to get out of debt that you could easily leave yourself in an unsafe financial place. Without any savings account or emergency fund to fall back on all it will take is one big unexpected expenses to tumble a wobbly house of cards.

Please update me on your progress by

You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.

Steve Rhode
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2 thoughts on “We Have Not Recovered Since Our 125% Home Loan. – Ryan”

  1. Thanks Steve. I have been forced to not scrape down to the bone. My wife has better common sense than I do. So that advice is good and I am heeding it. I know that there are new programs for people that can not afford their current mortgage. It seems to be a mechanism of salary to mortgage payment. I wonder if any such government programs for those of us that have decent salaries with respect to our mortgage but due to the credit card debt we have the same financial situation as those that bought homes they couldn’t afford. I will look into Chapter 13 bankruptcy. I really know nothing about it. I know that it has undergone a lot of changes recently. Can you point me towards some information on understanding it?

    • Ryan,

      Modifying your current mortgage does not solve your overall situation. Chapter 13 has not change since 2005. The best research you can do is to contact a local bankruptcy attorney and schedule a free consultation. Go talk to them and discuss your specific situation and then you can make an informed decision.



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