balloon home loan maturing. Options?

10 years ago

Our home loan matures the end of this month& we plan to meet with the lender next week. We want to go in prepared & aware of our options. Our income has decreased since we first took out the loan. We were late on the homeowners insurance & it got cancelled. There are rrpairs needed on the house so insurance agent may not insure us. Would like to keep bank from knowing that until we do repairs & get insurance back. My husband is 53 & I'm 43. Since we've been to the bank we have both lost our jobs but my husband is now disabled & its his check we live off. We are trying to sell his wprk truck - a delivery truck - so we could use that as colleral maybe? I would prefer to not have to pay on this house more than 10 years, less even better. I do want to keep our payments about the same or lower. We've been here about 15 years. We got a paper stating our property value went up so that's in our favor right? Any advice greatly appreciated!

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Comments (12)

triciae
10 years ago
Kathy, I'll just be blunt. Have you considered renting? There is no shame in renting. It is in many cases the responsible choice.

Here's a comment coming from a 30 year banker...

Not having insurance on the property is enough for your lender to call the note due and payable immediately. It's right there in your mortgage. Your lender will require proof of insurance before closing any extension. If the property is uninsurable there will be no loan extension. Lying to them is not a good idea. That is bank fraud. Not something you even want to consider.

From my vantage point and experience, I would counsel you and your DH to set a meeting with your loan officer at the bank. Lay the entire scenario out on the table with that bank officer. The chips will fall where they may. Banks want to make loans. That's how they make their money. Sometimes though they just can't. This might be one of those times.

Best of luck to you and your DH.

/tricia
emma
10 years ago
I thought if the insurance was canceled on a mortgage, the insurance company notified the loan holder????
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I know you mentioned "owner financing" but I tend to be leery (both as a buyer and as a seller) of owner-finance deals. Do read the link below. We bought the land for our current dream house about five years in advance of starting to build our house so I learned a few things along the way that might be helpful to you and may suggest another avenue for you to follow. First and foremost, land only loans are notoriously hard to get - even for property within a neighborhood that is already developed in terms of utilities. There just are not that many lending institutions that make land-only loans. Plus, the interest on land-only loans is MUCH higher than on practically every other kind of loan. In 2003, we bought 4 acres in a development that, I suspect, is very similar to the one you're describing. Price was right at $50K for the 4 acres. In 2003 mortgage and construction loans for those with good credit were running around 4.5 to 5%, and we could get a loan to buy a car or even a motorcycle for about 7%. But every place we asked about a land only loan wanted 8.5% or more! I have no clue why this is. It's not like one can abscond with a piece of land, or wreck it in a crash and then refuse to finish paying it off. But that's the way the market is. On an owner finance for a land-only deal, I would not be at all surprised if the seller wanted a percentage point or two above what banks are currently asking for on land only loans. After all, if the seller originally purchased the land by taking a land-only loan and still owes something on that loan, he's going to want to get enough to pay back his own loan plus make something for his trouble. When we decided to buy our new land, we already owned a home and had significant equity in it. So we realized that we could do "equity out" refinance on our first home and use the money to buy our land out-right. Because interest rates had fallen significantly since we'd first purchased our house 18 years previously (a 30 year flat rate), even after paying the fees to refinance, we actually came out ahead. Our monthly payments stayed almost exactly the same (the difference was less than $10/month) and even though we had taken out $50,000 in equity, the total remaining pay-out period only changed from 12 years to 13.5 years. We then started making extra payments each month and actually finished paying off the original mortgage plus the additional $50K loan in just five years more years. So the upshot is that we basically got to "borrow" the $50K to buy our land for free. So, if you already own a home and have equity there, you might look into a home equity loan instead of an expensive land loan or taking the risks associated with an owner-finance deal. The other thing is that, when you are ready to start building, the bank that makes your construction loan is going to insist on having foreclosure rights on the land the house will sit on as well. (That's reasonable since it would be pretty much impossible to foreclose on a house without foreclosing on the land it sits on!) And the bank is NOT going to want to be the junior lien holder on the land. So yes, you will have to finish paying off your land loan either before - or concurrently - with getting your construction loan. Whether a bank will loan you enough to pay off the land AND build the house you want is pretty problematic. Banks now typically will only loan 70% of the value of the finished property (house and land) and they expect the homeowner to put down the other 30%. If you own the land free and clear when you go to borrow construction money, you can claim its value as part of your 30%. If you still owe money on the land, then you are going to have to ask for a bigger loan (so you can pay off the land) and will have less equity to apply to your 30%. The bank that is going to make your construction loan won't care if you pulled some of your equity out of a previously owned house in order to buy the land outright. As long as you own the land free and clear, it's value can count toward the 30% you'll need to put into the new deal. Of course, one of the questions the bank WILL ask in determining how much of a loan you can qualify for, is how much you are currently spending on mortgage payments on unrelated property. But they don't care how much or how little equity you have in the unrelated property because they can't foreclose on that property if you fail to make your payments on the new place. Anyway, it's just an idea. It worked very well for us and might work for you. Here is a link that might be useful: Pros and cons of owner financing for buyers.
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I have to echo the words of popi and others. Fast forward 15 or 20 years into the future: would you want your daughter to stay in a situation like the one you describe? You need to think about the fact that she will tolerate the same things you are doing (or worse) because you have shown her that this is a reasonable thing to do. I'd even go further and say that you are also teaching her that it is okay to use someone that you have no love for and no intention of staying with. You are showing your daughter that if the other person is flawed, mean or "bad", you are not required by your moral code to treat him/her fairly and honestly (by being upfront with him about the fact that you do not intend to stay with him and will leave at your first opportunity). Your behaviour says that your values about how to treat people vary according to how nice they are to you. Since your husband and your daughter's step-mother both seem to be modeling unethical behaviour towards a spouse, shouldn't someone here model how to be a person whose values are solid and don't depend on other people's actions? I say this because it is always possible to describe something about someone else's actions that will justify our unethical choices. Don't make it easy for your daughter to do that. Help her become an adult whose standards do not vary depending on what other people do. If she should treat people the way she wants to be treated, then she should do it even if they don't deserve it because it is the right thing to do. I know leaving is easier said than done. I recognize you are in a tough situation but often the right thing is the hard thing, especially when it come to parenting. And I'm not sure I'd have the strength to do it myself, but I hope I would for my kids' sake. If you continue doing what you are doing, at least do it with your eyes open and be fully aware that she will likely become an adult who believes that giving people what they deserve is more important than doing what is right. Good luck.
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triciae
10 years ago
Most insurance companies do notify if a homeowners policy is cancelled, Emma. There may be some that don't, I don't know. And that doesn't necessarily mean the info has made it to the specific loan officer.

/tricia

This post was edited by triciae on Tue, Sep 10, 13 at 12:09
hilltop_gw
10 years ago
Providing incomplete or inaccurate information to a lender could constitute fraud so I'd be careful with what you are implying or contemplating. That could be criminal activity. You could be setting yourself up for future trouble if you get into a loan that you may not be able to cover. Do your homework, to find your options. Give them the true picture, see what they say.
Kathy Johnson
Original Author
10 years ago
Haven't met with the loan officer yet but have talked to her on the phone. Before we talked to her we called an insurance agent & he said he had to do some figuring & get back to us on premiums. When she called she asked if we had insurance & my husband said no but we were getting it today. We had already decided to go with this guy no matter what the costs were because we didn't have much of a choice. He calls back with the figures & my husband tells him the house needs repairs. The guy says he can't insure us. Its now about 4:30. We call one place & they're gone for the day. We had been with State Farm for years & didn't want to go back to them but my husband called them. They won't insure us until we've been insured with someone for 6 months. Tomorrow we'll call more insurance companies.

Its so frustrating. For years we paid monthly premiums on auto & homeowners. There were times we'd be late but then we'd catch up. For years we paid our insurance premium but when the butane man said we had a leak, insurance wouldn't cover it. Same when we had a water leak. So we didn't call them when the roof started leaking or the septic started messing up. Figured those were normal wear & tear like the gas & water. They cancelled us for being 30 days late. We didn't realize we had been cancelled until I called them. I had 2 different amounts & had called to find out which was correct so I could go by & pay both months. When she said we'd been cancelled, after all those years, it pissed us off. I got car insurance with another company but put off the homeowners "temporarily". Which stretched to a year & a half.
triciae
10 years ago
Kathy,

Does the septic system function? If not, does your town/county know? They might pull your CO without a working septic both for health reasons and environmental protection.

You need to speak with your loan officer. Delaying will only make the situation worse.

/tricia
Kathy Johnson
Original Author
10 years ago
Septic line goes out to a leach field, which is out in the woods. Years before we bought the place an access road was made leading to the neighbor's house. We think he busted the pipe from hauling bales of hay down to his house. Then my husband got someone to move the lid off the tank & they disappeared, leaving it to fill up & overflow. I am wanting to get someone to pump it out, but its collected leaves & such so I'm not sure if that's possible. Would like to replace the whole thing but we're having a hard time finding out what needs to be done, in the order, etc. Our plans are to get whatever insurance we can for now, make repairs on our on as we can afford them, & then in a year or so redo the insurance to better suit us. One of our biggest mistakes has been letting a small thing go until it got bigger (& more expensive).
LuAnn_in_PA
10 years ago
The first replay in this thread was:

"Kathy, I'll just be blunt. Have you considered renting? There is no shame in renting. It is in many cases the responsible choice. "

With all that you said here, I honestly believe that is your best choice.
You are not capable of doing all the things homeowners need to do... and now you are also short of cash to have others do them for you.
If you rent, the landlord takes care of all the problems!
mary_c_gw
10 years ago
You need to get away from this place and rent.

You have no understanding of how collateral on home loans works if you think you can put up a used truck for it. The property is the collateral.

You've let your property fall into disrepair, you have failed to keep up with your insurance premiums, and you say you're "only late sometimes"! Well, you're dealing with businesses, who also have to pay their bills on time. It appears they cut you some slack multiple times, and you appear to expect them to continue to do so. Why should they? You are a deadbeat customer.

I can't imagine anyone refinancing a property with a non-functional septic system, roof leaks, and a history of non-payment on basic insurance. Too risky for the mortgage company.

This post was edited by mary_c on Wed, Sep 18, 13 at 16:11
azzalea
10 years ago
Yes, the best advice anyone can offer in your situation, I think, is to get out from under. Sell the house, rent until you're financially able to start out fresh. I don't see any other way, given you seem to have limited fnances.

How about looking into your town's subsidized senior housing? You're not technically old enough, but they do make exceptions for disabled citizens. The rent is calculated on what you can afford--they take your income and expenses into account. Your rent will be recalculated annually. My mother lived in a beautiful, spacious, luxory apt in the senior towers in her town and paid $230 per month! On the open market, the apt. would have been a minimum of $1600--and I'm talking about 10 years back. Definitely an option you might look into. Check out the senior housing in several towns to see what you like. Good luck
lafdr
10 years ago
Did you meet with the loan officer to discuss your options?

You have been paying on the house for 15 years. Do you have any idea how much you still owe and what the fair market value of the house is in its current condition?

If you owe less than it is worth, you may be able to sell for more than you owe and walk away with money in your hand.

If you are upside down and owe more than it is worth, it may not be possible to get a new loan even with excellent credit and jobs.

Moving is such a hassle, it may be better to stay put. But depending on the condition of the home such as working plumbing/septic, leaking roof, it may be better to move to a new place if you can not afford to do fixes.

Even if you can not get a new loan, it could take months, even years for the bank to get around to kicking you out. So do not move out until they tell you that you must. I have seen it take several years several times where homeowners stopped paying and lived in their home 1-2 years before the bank finally kicked tjem out. I know of 2 other cases where the family moved out when they stopped making payments, and the house sat empty for years afterwards.

I am sorry for your stresses. It sounds like there is a lot going on all at once!
Kathy Johnson
Original Author
10 years ago
Okay, an update! Sorry I would have done it sooner but forgot where I posted this!!! We're staying where we are. We still owed about $30,000 when we met with our loan officer. Because of the laws or the kind of loan we had or whatever, we are doing another balloon payment so in 5 years we'll owe about $16,000. We did have a problem with getting insurance - everyone wanted us to have already been insured for at least 2 years before they would talk to us. Had a problem with people not showing up so we went with the one insurance that had someone show up. We still have repairs to do but it has always been our intention to pay for them ourselves & make adjustments later with the insurance. I have been trying to find out about what to do with our septic situation & all the information I can find looks like we have a cesspool instead of a septic line. I am having a really hard time finding out who to ask & what exactly I need to be asking. It's extremely frustrating. We live in a rural area - population is maybe 1000 so moving wasn't really an easy option.

balloon home loan maturing. Options?

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