How can a homeowner do away with an interest only loan with?

Question

the current market situation? When I purchased my home over two years ago, my goal was to refinance, get a lower rate, lower payment and do away with the interest only loan. Unfortunately, the market has took a dive and now my home has lost value like so many others.

Does anyone know of any plans or avenues to get out of the loan? I can afford my home, am not far behind and although I need a bigger home now, I am willing to stay for another two years and see how the market plays out.

Please, keep the smart comments to yourselves. I am ONLY interested in mature responses.

Answer 1

Unfortunately you took out an interest only loan when you couldn't afford to make a fully amortized mortgage payment.

You took a gamble that your value would increase, leaving you to refinance at a better rate, possibly even avoiding PMI.

Well, that gamble didn't pay off for you, and I am very sorry it didn't...but if the value is NOT there, you cannot refinance.

Period.

Unless you want a foreclosure on your record, which can bar you from getting another home loan for up to 5 years, you have no choice but to stay where you are until the market turns around.

A bigger home is a WANT, NOT a need.

The next time, if you cannot afford a fixed payment, then you simply, cannot afford that home.  This is why people are losing their homes left and right..b/c they gambled with the market, and that gamble just didn't pay off.

PS:  You cannot do an FHA loan, or ANY loan, if you owe more than the house is worth.

Answer 2

If you owe more than the house is worth you would have to bring the difference to the closing table if you refinance.  You can do a rate/term refi through FHA up to 97% of the value of your home if you don't want cash out.  Rates are in the 6-7% range fixed for up to 30 years.  However if you have been late (30 days or more) on the mortgage in the last 24 months you won't qualify for 97%.  Go to www.fha.com - there is a place on that site to key your zip code in to find an FHA lender in your area.  Good luck!

Answer 3

If your home is worth less than you owe, you won't be able to fully refinance.  You will need to come up with cash to make up the difference, and refinance only for the value of the property.

If your interest rate is decent, you CAN pay additional on your monthly payment, indicating that the difference is to be applied to the principal.

Sad to say, those are about the only options available to you at this time.

Answer 4

You may be able to get an FHA refi into a fully amortized loan at the new lower value / balance. Is the loan about to reset into the amortizing part, wherein your payments will spike up? That would be a factor. I suggest you call your lender and start with them. But keep in mind - they do not want to renegotiate these things unless it is the only chance they have to collect. It is a huge headache for them so they will try to scare and coerce you into continuing your current schedule.

Don't be afraid to play the foreclosure or short sale card with them.

Good luck.