WWKD,
We currently have a first mortgage of $280,000 with an interest only adjustable rate of 5.5% that will begin to adjust in January. We also have a second mortgage of $140,000 with an interest only rate of prime minus 1/2 that will be due in full sometime in 12 years. We tried to refinance and roll the second into the first, but the house dropped $250,000 in value and were not approved for the refinance. What options do we have if any. Signed: Thinking about walking away
Dear Thinking about Walking Away,
If I was able to make the payments and am current on both mortgages I would not walk away.
Yes, I would continue to plan and attempt to refinance to a fixed interest rate on both mortgages. Banks do not want you to walk away or go into foreclosure, that is a no win for both sides. I would try again with your current lender, that is always your best option, you may have to talk to multiple people each at a higher position than the other before you get someone to listen to you…remember their first answer will always be “no”, many times their second answer is “no” as well, but keep trying.
There are plenty of lenders out there, if your current lender won’t let you refinance, start shopping around but keep current on both mortgages.
You have a valid concern that once the interest rates begin to adjust you may not be able to afford the payments so the time to plan for that is now. Good news is, interest rates are still low, so even it it adjusts it should still remain on the low side.
