I just want to discuss what's going on in my little head right now and hope to hear from those of you more educated on the subject.
I qualified to buy a condo in 2004 (six years ago). I paid $6,000 cash for closing. Two years later I refinanced to get into a fixed interest rate of 5.5% for a 30-year mortgage. This cost another $11,000.00 in closing costs.
Now, when I add up what I've paid for this condo in six years (let's just use a round figure of $1,000.00 p/mo.), that's $72,000.00. So, with the added $17,000.00 in closing costs, I've paid $89,000.00. How is it I have only paid down $15,000.00 on my principle?! It's just not right.
Now that I'm unemployed and have a dead-beat ex who's not paying child support, I have to give up my condo to the BANK. Great! They've already taken $74,000.00 from me and get the home, too! Help me out here!!
And just as a side-note ~ if anyone brings up tax write-offs? I paid in at least 15% (conservative figure) of my income to taxes. Using a $40K annual gross, that would be about $6,000.00. So I get back around $2,000.00 Something wrong with this picture, too!! Grumpy me...:-/
You paid around 5.675% +- points for closing based on the $194,000 balance you gave below. For a bank it was a rip off. You should not have paid more than 3 to 4%. The loan officer made a killing on you and probably made money on the rate of interest called the yield spread premium. You should have questioned and gotten another quote on the CC and consulted someone else. Sounds more like a Broker fee than a Bank???? Very little principal did you pay the first two years but the CC is still too high. Although you have to remember that the Attorney's fees was added into this also and it depends upon what they charged and it can be 1% sometimes even in my area.
Have you tried the Obama refinance or modification program? You can do that if you qualify bit it does take forever.
I have worked in mortgage lending the bank side and the broker side for a total of 30+ years and I have seen so much of this and sadly it is too late for so many people. I am so sorry for you and I have some articles and a blog about these kinds of things.
My advise is to tell them you want a modification to a lower payment if you can't qualify for the refinance. If it does not appraise for the mortgage amount that is one of the stipulations of the refinance. They can lower the payment. Another alternative is a short sale....tell them you want a short sale and they will change their mind and try to help you.
A short sale is where you find someone who will buy it for less than the appraised value and sometimes what is owed on it. They would be loosing money therefore it will help them to decide it is better to help you than you loose it; if you want to keep it.
Read up on the Short Sale information on line so that you understand what you are talking about. These kinds of sales on going on everyday and it is your right to say I want to sell the house myself on a short sale unless of course you are already too far delinquent. Actually the bank really doesn't want the house back...it is just how it works if you can't pay the mortgage payment.
It is a shame that so many people have been taken for a ride. It is not necessarily the bank's fault; it was the regulations state and federal that allowed this practice. But, get smart and know what your options are and a short sale is one of them.
For a mortgage the amortization schedule on a fixed rate 30 yr. loan, you would be paying very little principle monthly. I've been in my house for five years, and my payments are close to the monthly figure you quoted. Roughly $150 is going to principle with the largest percentage going to interest. Of course, it will be reversed in the last five years of the loan with less being paid to interest and more than 80% going to principle.
Not sure of the dollars and cents of your total loan obviously, but $11,000 in closing sounds awfully high, especially considering it's almost double what you paid in the beginning. Often, though, closing costs are rolled into the loan as long as it doesn't put you outside of the LTV ratio the bank has set for the loan.
We did a refi earlier this year to get a rate below 5%, and closing was less than it was when we bought the house. I'm probably not telling you anything you don't know, but it pays to shop around. You may have paid more points on the refi than you could have gotten with another lender?
As to tax write offs, you should also be able to write off points if you had to pay them, but it is complicated and you do not get to claim the entire amount on your next tax return. You get to take a percentage for the next few years, but I don't remember specifics. Best to talk to a tax person on that.
As for refi's, they really should only be done if you are saving money for the length of time you plan to be in the home. It is better to pay a higher interest rate for a shorter period than to pay lower interest and get hit with points and other loan origination costs when you may be moving within a few years. Of course, I know your situation isn't expected with unemployment, but for next time you might want to consult with an actual mortgage broker who is impartial. There are also calculators online for figuring out points and determining whether a refi makes sense. Lower rates aren't the only factor.
Oh well, best of luck in your situation and hopefully you can get some back come tax time!
Still, I just don't think it's RIGHT for banks to take all their money from the get-go and leave the "owner" with zippo. My remaining mortgage is $194K and it's now worth $130K?! This is CRAZY. I bought the condo planning to live in it the rest of my life. I paid extra to buy the fixed rate down and then paid extra on the principle while I had a job. No one expects they won't be able to keep their home ~ nothing to show for it after all these years.
I wouldn't want to be in that situation either. I was laid off in August, so that part I can relate. It sounds like you were responsible and had the best intentions, so it's a tough pill to swallow.
I talked to my lender today. They said if one loses his/her job and if the mortgage payment is more than 30% of his/her monthly income, it's a good chance in qualifying for a loan modification (B of A). While I just wanted information, they wanted to take the APPLICATION now! That makes me a bit nervous. Anyhow, there's the latest. I'll keep us posted here. Perhaps my situation might help someone else facing the same struggle.
If you want to keep the place I would go for the modification. They will modify the terms of the loan by extending the years of repayment and also lower the interest rate for a period of time. Once you are in the modification and get some breathing room then you can work at paying off the loan at a faster rate by making multiple payments in the month. Most mortgage loans amortize daily, meaning it recalculates the interest on principal daily. You wont increase the amount of your payment, just the frequency in which it is paid.
Another option is to short sell the property, take the hit on your credit for a couple of years and get out of the situation all together. It's something you have to work out with the mortgage company too. This is the route I would take since your mortgage is much higher than the value of the home.
Rent for a while and when your credit is back to normal you can get in on some good HUD Foreclosures or other foreclosures. Plus, I would get the authorities to go after your deadbeat ex and get you that child support.
That's some good advice. I will see what the loan modification will do to the payment. While condo's fall the hardest in value during a recession, they also increase the most when the market goes up. In my first two years, the property increased by $115,500! I am glad the property taxes have gone down by $600 p/year due to the market drop. Your second suggestion sounds really good, too. I'm just sick over the fact I've invested so much in this property to have ZIPPO to show for it. The idea of buying another house in a couple of years (providing I can find a job that pays enough to qualify for a house) sounds good. I was making good money when I bought this place, and it's under 1200 sf. If I take a major pay cut, I can't imagine the DTI will feel much different. And, if I do get a good-paying job and keep this place with the loan mod, I can indeed pay extra when I can and get the mortgage paid down faster. Whew! What a lot to think about. Thanks so much!!
As far as the dead-beat ex, this County has a reputation for not going after them, just keeping the tab going. They're issuing a "seek work" order ~~ NOW, THAT'S A SOLUTION with unemployment being so high right now!! yea.
That means the bank loaned you about $210k. They collected $72k in payments from you (most of which only covered the interest on the loan), and they are now stuck trying to sell a condo worth only $130k. They didn't exactly make out like bandits in this situation either, I'm afraid.
Further, when you figure out what you've lost you have to consider what it would have cost to rent an equivalent place for 6 years. My guess would be at least $50-60k. So you paid $89k in costs, and got $50-60k worth of value, leaving you out $30-40k. Not a great result, but not that much different than the bank.
The only people that did well on this were the realtors and the mortgage brokers. (although, I realize most likely the bank in this situation is just servicing the loan, and whomever purchased the CDO is suffering the real losses, along with tax payers).
Wow, it somehow helps to look at it this way. But, really, if the bank collected $72K in interest and, if they were to sell the house for $130K, they end up with $202K out of the $209K mortgage. Not bad. The benefit to owning rather than renting is the tax breaks, #1, and the fact one doesn't get a 10% rent increase annually for the same apartment (i.e. rent of $950 year one) goes up each year: $1,045 to $1,149 to $1,265 to $1,391.00 after five years! Yet a mortgage of $1,200 stays steady (fixed). Personally, I think rental contracts should be capped at some point. Anyhow, I really appreciate your views. Thank you.
Actually the bank did make out pretty well. Consider how the banking system works:
I make a deposit in my savings account of $20,000. If the ratio of capital that the bank is required to keep on hand is 10% to cover the deposits, that means they can loan out (and collect interest on) up to 10x that amount or $200,000. This creates money out of thin air and is called fractional reserve banking.
They loan out the money for the condo and either collect the closing costs up front or as part of the loan. The bank then collects $72,000 in cash on the monopoly money that was created out of thin air. Then they foreclose. That $209,000 mortgage to which you refer is simply an accounting entry. It didn't cost them anything except the amount of interest that they paid on my deposit.
Even if they sell the condo for $60,000, they collect $132,000 in cash and can now claim that money as an asset and be able to create $1.3 million out of thin air collecting interest on those loans. And thus the process repeats itself.
That sounds like a scary position! You sound like you've done everything right, and the best you could do. I wish you luck and hope you can catch a break. I think if you plan on staying at that condo for the rest of your life it is worth it to do everything you can to keep it in the hopes of being mortgage free one day, but I can understand just being tired of the situation.
Thanks so much Lmoot. Still no bites on the job market and with the halting of unemployment benefits for those who got new claims after August 2009, money runs out in March. I had attempted the loan modification, and while the bank said I qualify, there's been absolutely NO WORD, NO PAPERWORK, no NOTHING for the 45 days they said it takes to process it. I'm not pursuing it at this point, as with no income it's mute. God has a plan and I will keep my faith ~ no one can take that away from me!! God bless.
One thing you can do to cut down on the interest take the bank gets and build up equity faster is to make biweekly payments instead of monthly. You are still paying the same amount but you will pay off the note much faster and you will pay less in interest because it has less time to accumulate. Financing anything is always the least desirable option when compared to paying cash but sometimes when it comes to a home purchase, it's the only way you can buy instead of rent. You just have to be sure you understand the real costs up front before you dive into something with such long term financial impact. If it's too much, it may be better off to just wait on the purchase and continue to save.
if you do not have a job, you cannot pay no matter weeky, monthly, by-weekly, it's all B.S. That's the price of having your home on a credit. But unfortunately there is no other options for ordinary people. You cannot possibly save money for 20-30 years to buy the house. If you have a credit - buy it now. You've lost your job - sell it if you can or just walk away. it sounds awful but, what else can you do? You'll have a job you'll buy another one. It's just a house, not all your life anyway. Do not kill yourself over it even if it was your home for many years, get over it. It's life.
Yes, while I appreciate the excellent advice of lender3212000, it is kind of mute when one is unemployed. I was actually doing this when I had gainful employment (whereby I bought the place). So far, I've been fortunate (God is somehow seeing me through) as extensions have been approved on unemployment benefits ~ kind of feels like standing on the edge of a cliff at times. My parents have graciously helped to make ends meet. Anyhow, I found out that if you take a job that pays too little to keep the current mortgage, after three months of (purposefully) missed payments, a loan modification is a possibility. I certainly recommend letting the bank know up front you won't be making payments and need the loan modification, so they're not caught off-guard with the plan.
Once the loan modification is approved, they just monitor your income and increase your payment as your income increases. I really don't know much more than this, as I haven't gotten to that point yet. If I do, I'll try to help others going through the process.
Thank you so much. You're right ~ it's just a house. lol ~~ have we not overcome hard times already? Can we not do it again? Where is our faith, amen? Amen.
Loan modifications are not necessarily a good idea. They may be getting more out of you with the modification than you are gaining. Make sure you hire your own attorney to review all of the paperwork, and relax, and take your time. The best thing you can do is stay in your place as long as possible. Also, stop paying the COA and property taxes. They can’t do anything but take your negative equity . See my profile for my website and more information.
Nice story! informative and at the same time inspiring.
loan mod through the govt.? I have a relative approved since 8 months ago. No final paperwork or nothing. Just the typical process, red-tape. Hey and guess what, when the bank forecloses on you they still have it insured for what you paid, even if it drops in value.
It's more money in their pocket vs. $1.000 incentive from the govt to modify your loan. The bank's best interest will always take precedence in a financial deal.
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