| Hypothetical Scenario Paying off home mortgage |
|
|
|
|
|
Avino
Preferred Member
Cash: $ 24.80
Posts: 117
Joined: 27 Mar 2006
|
| Hypothetical Scenario Paying off home mortgage |
 |
|
I believe we have all seen on the news how some homeowners in trouble have been able to renegotiate their debt, in order to keep their homes. Often times the bank forgiving some of the money they owe over the home's value.
So lets say I, a person in good standing with my fixed rate mortgage, a good income, credit score, etc, want to pay off the balance on my mortgage (lets say I had the money stuffed in a mattress somewhere), but my home is now worth less than what I owe, does anyone think the bank would let me just pay off my home's value and forgive my debt above what my home is worth? Or would I have to threaten the bank with walking away from my mortgage in order to get this type of a deal.
I know that it stinks, but its almost as if there now exists all the incentive to being a bad borrower in order to get a good deal. For example if I owe $412K, but my home is worth $375K, I could save $37K by being a bad borrower and getting the bank to re-do my mortgage, or I could be a good borrower and pay off the balance and effectively loose $37K if I ever sell my house at its current price.
What are some thoughts on this. I want to know what banks are doing to reward people who are in good standing and not at risk like people with ARMs.
~A.
Also blogging @ avinos2cents.blogspot.com
|
Tue Apr 29, 2008 7:26 pm |
|
|
Avino
Preferred Member
Cash: $ 24.80
Posts: 117
Joined: 27 Mar 2006
|
I sent an email to my bank asking them if anything will be done for those of us responsible with our mortgages. I expect the answer to be that nothing will be done, but I'm curious nonetheless.
This market is angering me in that right now the people who were irresponsible are being rewarded while the rest of us are just getting a good old pat on the back.
~A.
Also blogging @ avinos2cents.blogspot.com
|
|
Tue Apr 29, 2008 7:47 pm |
|
|
Avino
Preferred Member
Cash: $ 24.80
Posts: 117
Joined: 27 Mar 2006
|
Hi Tim,
You are right of course, I have a fixed payment and rental income that I can raise on my tenants every year, so my share of the payment will always go down.
But for us being a country of free markets and allowing the market to work, it seems to me that the government steps in an awful lot and doesn't allow for market corrections to run their natural course. It makes me feel like our economy is so fragile it needs hand holding anytime there is a small rock in its path. And then the ones that get the help are the very same ones that screwed up in the first place. That just seems fundamentally wrong to me.
~A.
Also blogging @ avinos2cents.blogspot.com
|
|
Wed Apr 30, 2008 1:46 pm |
|
|
efflandt
Senior Member
Cash: $ 80.45
Posts: 401
Joined: 25 Apr 2005
Location: Elgin, IL USA
|
|
|
|
Everyone should have been aware that following the 2000-2001 period interest rates had dropped so low by 2004 for so long inflating home prices, that anyone buying at the peak of the real estate bubble and interest rate lows should have locked in a decent interest rate at that time.
I bought my home in 2002 when interest rates were still about 7% and homes were selling in a week or two, often sold before they even appeared on the internet. When I refi'd to shorter term at lower fixed rate in early 2005 my lender included a free HELOC to borrow paid principal. The interest rate on that HELOC swung up to 7.5%, but with the latest 1/4 point drop will now be down to 4.5% (which is lower than my fixed rate).
But if you bought at the peak of the bubble and are in good standing with your loan, they will not even discuss forgiving any of it unless you are in default with no hope of paying. Even if that did happen, you would owe income tax on anything forgiven (for anything other than principal residence) and a deficiency on your credit report would cost you higher interest for any new loans for years into the future. So there is no easy out if you can afford what you got into, you just need to ride it out an look for some bargains with that stash of cash.
|
|
Thu May 01, 2008 12:19 am |
|
|
Avino
Preferred Member
Cash: $ 24.80
Posts: 117
Joined: 27 Mar 2006
|
quote:
Originally posted by efflandt
So there is no easy out if you can afford what you got into, you just need to ride it out an look for some bargains with that stash of cash.
Efflandt, Realistically this is exactly what I am going to do, I have already started looking at real estate, I will need a bigger house soon than the apartment I am in (which I own). So I will rent it out and probably buy a single family that needs some work. Since I plan on living in this new home, working on it over a year or two to get it up to my taste will be fun.
And by the way the response I got from my bank when I asked them the above question was to contact one of their specialist that can help me with all my loan needs, basically a standard email with mortgage phone numbers. I didn't think they would give me any real answer.
~A.
Also blogging @ avinos2cents.blogspot.com
|
|
Thu May 01, 2008 7:57 pm |
|
|
austin
Contributing Member
Cash: $ 7.20
Posts: 36
Joined: 29 Jun 2007
Location: Austin
|
| Banks |
|
|
We have been working on a few shortsalesfor clients. Even with people that are not making payments the banks are not returning calls. It takes weeks to even get assigned someone to work on the case.
Anyway so I would assume if you are making your payments your response will be worse.
|
|
Mon Jun 16, 2008 5:23 am |
|
|
|
