1st mortgage with chase 3. something interest, adjustable, 2nd mortgage Indymac 12. something interest, fixed. No late mortgage payments, very low credit score and no equity in my home.
I need wise advice on how to resolve this situation—high interest and two mortgage payments. Please give all information you have on this situation
Refinancing both loans into one lower fixed interest rate would be the obvious solution. However, with very low credit scores and no equity in your home, refinance probably won’t be an option. If you have the ability to hold on for a couple years and build your credit scores back up, this could be an option.
You could look into loan modification if you haven’t already. Modifying your 1st mortgage may possibly get you out of the adjustable rate, but with a 3% interest rate already, you won’t see much relief (if any) for the monthly payment amount. I’m not sure if all the work that would be involved in modifying this loan is going to be worth it, just to get the rate fixed.
Trying to modify your 2nd loan may be a better use of your time. With a 12% interest rate, there is definitely room for improvement. If you’re able to get that interest rate down through modification, you could save money on your monthly payments. How much you save will all depend on the balance of the loan though. The higher the balance, the more opportunity for savings. And on the other hand, if the balance is really low (under 20k), you won’t actually save much, even if they drop that rate to 4%, it could only end up saving you small potatoes in the end. Modifying a 2nd mortgage is the same process as modifying a 1st mtg, so you want to consider whether or not it will be worth your time.
Depending on how far underwater your home is, and any other debts you have, you may want to speak with a bankruptcy attorney. If you qualify, bankruptcy could potentially strip the 2nd mtg and leave you with only the 1st mortgage to pay. From what I understand the 2nd mtg would need to be completely underwater in order to strip it, but a local bankruptcy attorney would be your best source for this information. Click here to find a local bankruptcy attorney.
If you find that none of these options are workable, then you may want to strongly consider letting the home go. Even if your home is underwater, you can still sell it. This is called a short sale and it allows you to sell the home, release both loans, and move on with your life without the lasting damage of a foreclosure. A short sale won’t cost you anything in real estate commissions and there are many real estate brokers that have a lot of knowledge in this field. To learn more about short sale you should find a local broker, call them up, and schedule an appointment to meet with you at your home. They can give you a realistic market value for your home and lay out your options.
Good luck and please keep us posted on your progress in the comment section below.
Andy is a licensed real estate broker in Massachusetts and is the founder of Northeast Properties in Norton, Massachusetts. His brokerage is designed to help homeowners in today’s difficult real estate market, specializing in short sales. Andy speaks with Massachusetts homeowners every day, helping them to address their questions or issues with short sale or loan modification. He enjoys helping consumers arrive at the correct solution to their problem, and believes that the only way to correctly do that is by presenting them with all of their options in an un-biased manner.