You may be able to make your mortgage payments right now. However, money is getting tighter and tighter. You have found it necessary to take money out of your savings to pay your mortgage.
The amount in your savings account is decreasing quickly and in a couple of months you don’t know what you’ll do. There will be no way to make those mortgage payments. You and your family love your home. You don’t want to lose it. What are you supposed to do?
One option you might have is to refinance your mortgage. You think that you can get a lower interest rate. Your monthly mortgage payment will drop but not that much. You can manage on that. However, it will be a sacrifice.
You have never been in a situation like this before. You have always paid your bills on time. Should you refinance your mortgage?
Up until March I would have told you that refinancing probably would have been your best option. There were certain other options like getting a modification to your mortgage. However, mortgage companies only modified the mortgages of those people who were three months or more behind in their payments.
Even then the modifications were in the mortgage company’s favor. Penalties and interest were tacked on to the balance of the mortgage. The monthly payments were not reduced much at all. In some instances the payments were increased.
In early March the Obama Administration announced the Making Home Affordable Modification Program. This standardized the way loan modifications are done. The monthly payment is brought down to 31% of a person’s income. That payment includes not only principal and interest but also taxes and insurance.
These lower payments continue for 5 years. After that they rise. However, they only rise until they hit a low fixed rate which is set at the time the modification is agreed to.
The Making Home Affordable Modification Program was modified at the end of April. This change provides for the modification of second mortgages.
So what does this mean for you? Very simply you may come out better with a loan modification under the Making Home Affordable Modification program than you would if you refinanced your mortgage.
That’s not all. You would be better off to consult with a lawyer or an expert who specializes in helping people facing foreclosure. They can review your situation to see if there was anything illegal about the mortgage you got. If there is, you might qualify for even a lower interest rate and a lower monthly payment than you would with a modification under the Making Home Affordable Modification Program.
So what I am telling you is, Don’t jump at the first option presented to you. You need to know all of the options that you have. You want to choose the best one. Your goal is to protect yourself and your family and save your home at the same time.
Much Success,
Mark Elkins
