Is it better to go into foreclosure if the bank wont lock-in your adjustable rate mortgage?

Question

APR to hit in October, could raise interest rate from 9.75% to 12-15% interest, then every 6 months re-adjust per the LIBOR. Making my payments each month yet that will not be possible over the long run with that high of an interest rate. Contacted the banks litigation department to do something ahead of time (havent been late yet)- they said they can not help me lock in my interest rate. Yes, bad credit now with divorce two years ago. Should I just stop making payments and cut my losses now? The house is not even worth what it was two years ago- thought about selling but wouldn't get what I owe, value dropped significantly. Not sure what to do.

Answer 1

There's a terrific article at eHow on steps you can take to avoid foreclosure:

http://www.ehow.com/how_2256426_foreclos...

How to Avoid Foreclosure During the Subprime Crisis

Read through it carefully, follow the steps outlined, and make full use of the Resource links provided.

If it's not too late, you might to look at this one, as well, on renegotiating your mortgage with your bank:

http://www.ehow.com/video_2277196_renego...

How to Renegotiate Your Mortgage and Lower Your Monthly Payments

Lastly, you might want to check out ways to earn some extra cash

http://www.ehow.com/how_2254361_money-in...

How to make money on the internet, scam-free

Hope that helps.  Best of luck.

Answer 2

Values go up and down.  I knew someone in 1996 who told me she was mailing the keys to her Marina Del Rey condo back to the bank because she was upside down, had recently married, and was living somewhere else.  I suspect she didn't owe more than $75K on that condo.  9 years later it was probably worth $400-$500K.

You know that your rate is set against the LIBOR, did you know that index has DECREASED by about 3% the 6 month rate is just over 3% today and 3.26% for the 1 year rate.  As for your adjustable rate, you need to review your note.  It will tell you the margin that the lender ads to the index rate to determine your payment.  It will also specify how low your payment can go and how high in each 6 month period.  It is possible that per your note, your payment can't actually go up when the index is this low as your loan is structured.  Always good to check and see.

Answer 3

Man, I know this feeling all too well...if you owe more than the house is worth then you can't get refinanced...BUT if you owe less than you can get the house appraised for then you can get the house refinanced at a fixed rate...which is pretty high right now, but much lower than 12-15 percent.  

If there is nothing that can be done with refinancing or anything, then foreclosure despite the devastating hit to your credit, may help.  However, I have heard cases of people still owing money after foreclosure so if you have to go this route, make sure to go to those 'free first visit' lawyers to make sure you aren't going to owe 20 k on top of the foreclosure.

Answer 4

ARMs can really pose some problems for homeowners, but are you really willing to risk foreclosure? Other people out there are doing their best to avoid foreclosure while you are contemplating on giving up on your home. The low values of homes today are effects of the housing crisis, maybe you can take refuge in the fact that others have low value homes too. If the bank cannot do anything about your mortgage, then it is time to look for an alternative. www.mortgages-for-everyone.com is one useful website for questions like you have. I've tried it and it is good.