I have 260K 1st mortgage at 5.25% and 49K 2nd mortgage at 7.5%.
My 2nd mortgage is a balloon loan due next April.
The home market value is 265K.
Do I need to payoff my balloon payment?
Is it worth paying of the balloon payment when we have negative equity?
Is there any way to avoid this balloon payment?
I have contacted the bank. They said I need to contact them 2 months before expiration ie February. I need to show financial hardship to get 2nd mortgage modified.
Do you have a choice?
The balloon payment is due next April and that means the bank expects you to pay it off.
The gamble was to amass enough equity before the balloon payment is due and then refinance and absorb the 2nd into the refi loan. Only one big problem…. your house only gained $ 5,000 in equity. Not enough to be able to refinance and absorb the outstanding 2nd mortgage of 49K plus 7.5% interest.
This type of financing is what did most people in….. You financed the down payment…. and thought that you could gain enough equity and then refinance or sell the house and pay off both first and second mortgage.
This is why the mortgage debacle isn’t over yet…. the second wave of ARM’s is coming due for reset and/or the 2nd mortgage balloon payments are coming due.
Talk to your lender immediately. Do not stop making your mortgage payments even if the bank tells you to and hope that you can get a loan modification.
It’s worth it if you want to continue living in that house and you don’t want to have your credit done under.
If you don’t pay it off they’ll likely foreclose on the property. You don’t have enough equity in the home to refinance both loans. I can’t think of any options to avoid the balloon payment. You’ll need to talk to the bank and see what they have to offer.
Plenty of people are backwards on their loan but they still make their payments. Just because you have negative equity doesn’t entitle you to disregard your obligations.