Mortgage woes

paplockSeptember 8, 2008

I got in on a mortgage I shouldn't have qualified for. My wife believes be easier to let go of some expenses: second car, timeshare, boat. I would prefer not to and try a refi for a lower rate. But my concern is that I'm not the only guy in line for a re-fi, and my new rate might not be so helpful. What are other folks' experiences with refinancing?

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First of all, when you refinance you have to put down another big chunk of money (just like when you first got your mortgage. Do you have this money available??

Second, when we refinanced we locked in our apr. We had an ARM and it went down for a couple of years (as we expected) and when it started to go back up we refinanced. The ARM was really awesome for us because we could pay OVER our monthly amount. When we refinanced it was for a little more than the what our current rate was. We could not have found a lower yearly rate than our ARM. So depending on they type of mortgage you have, you may not be able to find a better rate. You have to look. Our credit score is also EXCELLENT. if yours is not, your rate is going to be higher. There are a lot of things that go into you getting a good rate. If you don't have a big chunk of cash available for actually pay the refinancing fees then you really should think about selling one or more of your items to fund the refinance.

Also, how often do you use your timeshare, boat and second car?? Even if you can afford all those items and a new mortgage...if you don't use those items frequently then it would be smarter to sell one or all off and put that money in the bank for something you really will use.


    Bookmark   September 8, 2008 at 8:52AM
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"got in on a mortgage I shouldn't have qualified for"

Any chance of selling and getting something you CAN afford?

    Bookmark   September 8, 2008 at 11:05AM
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We re-fi our home to put in a new well. Personally, if you have to re-fi to have "toys" -- you need to re-think your priorities. Your wife is right -- get rid of some of the stuff. The boat and timeshare, for starters.

Sell the car and get a less expensive one.

We have a society that thinks we "deserve" it all and we deserve it "now". We need to re-think that little idea.


    Bookmark   September 8, 2008 at 2:14PM
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Always take your wife's advice. It's the easy (and wise) way out. Besides, if you're needing to cut down on unnecessary spending, getting some time share relief is the way to go. I used to have one and I realized I didn't really want it that much. They're a pain to get out of and don't contribute all that much to your enjoyment, in my opinion. Get to the cutting down already, refinancing is better saved for a more critical time.

    Bookmark   September 9, 2008 at 2:14AM
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You don't live in the boat or timeshare-you do live in your house. Even if you are in a position to refi, the mindset you have is all wrong. Cut out the fat.

The federal gov't will bail out these bad mortgages and guess where the billions of dollars will come from?

    Bookmark   September 10, 2008 at 2:07PM
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Seriously, get rid of the toys first off and then set about cutting your other expenses. See how much extra cash is available to you and go from there. Your wife has the correct mindset so do follow her. And read this forum from the farthest back you can many good tips and advice for everyone no matter what your situation is. Some ideas appear to be radical but they worked for someone so never turn up your nose if an idea doesn't appeal to you.

    Bookmark   September 11, 2008 at 5:36PM
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We're refinancing our house now to a fixed 30 year loan as the rate has gone down this past week. Since the house value has gone down as well, we'll have to come in with additional cash at closing to make up the difference. I don't mind doing that as we'll have a lower loan amount and a lower monthly payment.

I would sell the car, boat and timeshare - put that money into the refi, that way you'll owe less and worry less about your mortgage (less worry = more happiness = longer life)

    Bookmark   September 17, 2008 at 12:00PM
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I bet you knew you shouldn't have quailfied when you did. We all need to sit down with a pin and a paper and figure out what we have coming in and what we have going out each week (month). A time share and a boat are luxury items in our household. Sorry fella, but your wife is right this time. Dump the time share and the boat. I have wanted many things in my life but if we don't have the money to pay for them we don't buy them. Doing so only creates troule.. Often creates problems that is very hard to get out of..

I would say the majority of the people that got into loans like this could not afford them from the beginning. Sad that they didn't do some figuring before doing so. I know everyone wants to own a home but unless you handle the money right it is a difficult thing to do.

When we bought our home 40 years ago we put everything we had down on the down payment. We bought a used frig for $25 and used it for 5 years. We bought some furniture that we needed at the time and no more. I never had new living room furniture until a year after we got our 3 kids through college. So many now want it all - new house, furniture, cars and all the trimmings. This is a huge problem in our world today..

Listen to your wife this time around.. She is right..... I hope things work out for both of you.. It is going to take some work but you can do it if you just give up a little.


    Bookmark   October 3, 2008 at 3:55PM
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Hi paplock,

I assume that you know an approximate price (and that fairly current and precise) that you could receive if you were to sell your home now.

And that the mortgage amount owing is for a much lower figure.

If the current value of your home is close to the amount owing on the mortgage, (and certainly if it's below it) if I were you, I'd let sleeping dogs lie, leave well enough alone ...

... and hope that the lender doesn't come looking for you. Which they are almost certain to do ... and soon.

The banks are running scared in recent times, due to the great losses sustained in those millions of mortgages that were issued for the full appraised value of the home, and at a low current rate on an adjustable one. Sometimes the borrowers understood that their mortgage rate was about, e.g. 2% ... but that the real rate was something like 5%, with the difference being added to the balance owing (i.e. the balance owing was increasing, not being reduced). Sometimes they didn't.

Then, when the time for adjustment came, and the real rate was being charged, it resulted in a much increased monthly amount to be paid, which the borrower could not meet, so had to default. It would be wise for him to sell, himself, for if he walks away and the bank has to foreclose and re-sell the home, a number of extra costs are involved, adding to the amount owing.

Also, in many areas, the value that can be received on re-sale is much lower, resulting in there being a substantial shortfall between the amount of money received on sale, and the amount owing, and the (former) owner is much more interested in getting as high a resale value as possible than is the bank after foreclosure.

In many states, this resulted in the bank sending the former owner who defaulted a bill for the difference ... sometimes in the amount of $20,000., or $35,000., etc.

Which made everyone very unhappy.

I am a resident of a different country, and those bad mortgage games (which should not have been set up in the first place) have cost me quite a large amount of money, as a Canadian bank in which I've owned shares for 40 years not only had substantial exposure to those sub-prime mortgage loans in the U.S., but the rumour that I have heard is that they guaranteed a company which insured those sub-prime mortgages, which is being forced to come up with the difference between the amounts being received for foreclosed mortgages and the amount owing, now that the prices available have gone down, in some areas something like 20% or so.

Those bank shares of mine could have been sold in May 2007 for $107. each, but in the time since have benn slipping, then recovering some, then slipping some more ...

... and in recent times, as several of your large lenders, banks, etc. in the U.S. have been going belly-up, or being taken over (and sometimes with government pressure and incentive) for cents on the recent-dollar value, due to holding far too many of these rotten mortgages ...

... have been much lower.

In May 2008, around $76.30 - $69.80 ... in early Aug., $62.25, late Aug. $64.17 ... and now, after your government agreeing to support that market ... by, what ... 750 billion? (in addition to the huge debts being incurred due to the war in Iraq) ...

... $58.50, last Friday, down $3.68 in a week.

That's a long way down, from $107. a year ago May.

On several hundred shares.

So your U.S Dollar and debt woes are having an effect not only within your land, but in other areas, as well.

You can see why I'd like to hang some of the practitioners who made such loans up by their toenails ... sorry, that would be "torture", wouldn't it?

In addition to which, I bought shares in a Canadian stockbroker, many years ago (I'm almost 80), that later was bought out by U.S-based Merrill Lynch, who issued me (not a large number, thank God) of shares of their company which, almost broke due to those same stinky mortgages ...

... was bought out last week (for peanuts) by Bank of America. Imagine - Merrill Lynch, whose logo for years has been a bull ... going broke??

Each share worth, in spring 2007, over $100.00 ... last winter, over and under $55.00 ...

... now saleable for pennies over $26.00.

I, a former regular liberal Protestant clergyperson, so not some highly paid TV evangelist/fundamentalist, am not a wealthy person.

Lenders are being far more strict in the criteria that they use regarding loans, now, more so in your land than in mine.

I've had a "fully-secured" (by stock certificates and those of mutual funds) line of credit with a bank for a number of years, much of the time lying unused ... at prime interest rate.

When I went to see the lender the other day, he says that that line of credit is now an unsecured line, at a higher interest rate, as the only security that their bank allows now is a home or a GIC ... so they will allow no credit at all for my securities ... I may as well pick them up and bring them home.

And my question is ...

... if the big shots in his bank, who set the rules in place, think that my stocks and mutual funds are of no value as security ...

... how much value should I place in them?

I have shares in only one U.S. company ...

... and I'm not about to buy more ...

... for these huge debts that they're incurring (plus printing money) mean that they'll have to offer higher interest rates in order to entice their foreign lenders to lend to them in future ...

... plus the value of the U.S. Dollar will almost certainly decrease.

Unless the current value of your home is a great deal larger than the amount owing ...

... if you start talking refi- these days ...

... you may be disturbing a large nest of potentially angry bees.

It'd be a real shame were you to be forced to live in your timeshare for, what - a couple of weeks? a month? per year ...

... and on the boat for the rest of it.

Wouldn't it?

Just one person's (granted, substantially biased) view.

ole joyful

    Bookmark   October 5, 2008 at 4:51AM
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Ed, I hope you're not holding any Euro-denominated shares of anything as of now -- this problem is worldwide and the U.S. Dollar will likely lead us out of this fiasco. Might just be time to stop bashing the Dollar for a while......

    Bookmark   October 5, 2008 at 9:07PM
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There proves to have been a major error regarding my message in my earlier post, which needs correction.

We have a federal election coming up on Tuesday - called just a little over a month ago.

En route to one of the local campaign offices the other day, I visited a local branch of the bank which carries my Line of Credit.

In discussion with one of the advisors, he said that it actually is true that my line of credit continues to be fully secured, using the stocks' and mutual funds' certificates as collateral. I checked with a different branch, later, to be told the same story. I revisited the original branch, where my L O C is carried .. to be told by the earlier advisor that there'd been a misunderstanding, that the (currently dormant) Line of Credit really is fully secured.

Actually, I disagree about "misunderstanding" - as I checked the issue with him on the first day about three ways, going at the situation from different viewpoints, to be given the same information each time.

In any case - my Line of Credit is still fully secured.

So - my concern that the big shots at that bank appeared to be figuring that stocks and mutual funds are useless ... is erroneous.

Good wishes as you work through your current issue.

ole joyful

    Bookmark   October 13, 2008 at 10:22AM
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My two cents:
In my household, if I were having to re-think my expenses, I would definitely be getting rid of the boat and timeshare without question. Luxury items.

As for the second car, if it's a necessity to have that car (like getting to work because you have to keep a job to keep the money coming in) then I would keep it, or look into options for more affordable "second" transportation. If it's truly a second car and not necessary, then it would be gone in my household.

Sorry I can't give thoughts on refinancing because I've never done it. With equal priority as getting rid of luxury items and looking at refinancing options, I would seriously re-evaluate the home...being very honest with yourself and your income...and decide if the house is something you could have truly afforded to begin with, knowing what you know now. I'm not talking about nickel-and-dimeing your overall budget...tweaking out little things here and there in hopes of making your mortgage doeable. I'm talking about looking at the big picture and determining if you are giving up too much just to stay in the home. If you are having to scrimp and scrape just to stay in the home, it's probably more than you can afford. If that's the case, I would start looking at housing options that are within your means.

I hope you can come up with a workable solution that doesn't turn your life upside down. It's tough times out there. Good luck to you.

    Bookmark   October 18, 2008 at 7:17AM
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