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Old 04-16-2015, 08:29 PM
 
3 posts, read 4,170 times
Reputation: 11

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1st Mortgage = 30 year fixed 4.25%. Balance of around $110,000
2nd Mortgage = 15 year balloon 7.875%. Balance of around $20,000

Needless to say I didn't really know what I was getting into when we took out this 2nd balloon mortgage. The original balance on this was $23,800 and after almost 9 years I've only paid it down to about $20,000.

I've called a couple banks inquiring about refinancing one or both of these with no luck. The first one would not touch it unless I had at least 20% equity in it. I may be able to do it with my current lender but I would have to go back to paying PMI which I do not do today. Without any kind of appraisal, they both estimated the house to be worth around $115,000. In reality its probably more like $130,000 or so.

My current lender said I could try to work with them to Modify the terms of the 2nd mortgage if I was having some kind of hardship or difficulty making the payment and that it would also affect my credit score. The problem is not making the payment, I actually pay extra each month but more than half of it goes to interest so the actual balance is barely going anywhere. What I really want is to avoid this coming down to the end of the term and still owing like $17,000 which is about what it will be and there is no way I can just hand them a check for that.

So my question is... Would there be any benefit to taking out a personal loan for say 48 months to pay this off? Assume I could get an interest rate of around 7.99%. I know the monthly payment would go up but I'm not too concerned with that. Between my current 2nd mortgage payment and the extra amounts I pay on it and my 1st mortgage every month I'd estimate an extra $100 or so a month than what I'm paying now. And I would be done with it in 4 years. Does that make sense or am I missing something?

I'd appreciate any input. Thanks
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Old 04-16-2015, 08:49 PM
 
Location: Southern California
4,350 posts, read 4,933,884 times
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Get over the PMI phobia. What would your rate and payment be even with the PMI. I wouldn't play the miss a payment game of chicken. I think you should be making extra payments to the 2nd not the 1st.
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Old 04-16-2015, 11:10 PM
 
Location: Denver CO
18,977 posts, read 10,047,592 times
Reputation: 27756
does a 15 year balloon amortize differently? Otherwise I can't understand how you can pay off the same amount in 4 years at 7.99 than you are saying you won't pay off in 6 years at 7.875. But generally speaking, if you can afford to pay more, I'd just throw it all at the balloon and get it done instead of messing around with another loan.
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Old 04-17-2015, 08:22 AM
 
12,404 posts, read 9,203,248 times
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Quote:
Originally Posted by stupidballoon View Post
1st Mortgage = 30 year fixed 4.25%. Balance of around $110,000
2nd Mortgage = 15 year balloon 7.875%. Balance of around $20,000

Needless to say I didn't really know what I was getting into when we took out this 2nd balloon mortgage. The original balance on this was $23,800 and after almost 9 years I've only paid it down to about $20,000.

I've called a couple banks inquiring about refinancing one or both of these with no luck. The first one would not touch it unless I had at least 20% equity in it. I may be able to do it with my current lender but I would have to go back to paying PMI which I do not do today. Without any kind of appraisal, they both estimated the house to be worth around $115,000. In reality its probably more like $130,000 or so.

My current lender said I could try to work with them to Modify the terms of the 2nd mortgage if I was having some kind of hardship or difficulty making the payment and that it would also affect my credit score. The problem is not making the payment, I actually pay extra each month but more than half of it goes to interest so the actual balance is barely going anywhere. What I really want is to avoid this coming down to the end of the term and still owing like $17,000 which is about what it will be and there is no way I can just hand them a check for that.

So my question is... Would there be any benefit to taking out a personal loan for say 48 months to pay this off? Assume I could get an interest rate of around 7.99%. I know the monthly payment would go up but I'm not too concerned with that. Between my current 2nd mortgage payment and the extra amounts I pay on it and my 1st mortgage every month I'd estimate an extra $100 or so a month than what I'm paying now. And I would be done with it in 4 years. Does that make sense or am I missing something?

I'd appreciate any input. Thanks
You never told us when this balloon payment is due. This is important, if you're seeking advice on handling it.
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Old 04-17-2015, 08:51 AM
 
3 posts, read 4,170 times
Reputation: 11
I didn't look any further into combining them both and refinancing since they said I would have to pay PMI again.

I currently make extra payments on 1st and 2nd. Even if I paid it all to the 2nd I'm not sure it would be paid off by the end of the term which is in 6 years and 2 or 3 months.

Regarding the question about if a 15 year balloon amortizes differently... I'm by no means an expert on this, but it does not fully amortize after 15 years. The way I understand it is the payments are treated as if it were a 30 year loan. And then when the 15th year is up, whatever balance is left (balloon payment) is due in full.
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Old 04-17-2015, 08:52 AM
 
12,404 posts, read 9,203,248 times
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Quote:
Originally Posted by stupidballoon View Post
I didn't look any further into combining them both and refinancing since they said I would have to pay PMI again.

I currently make extra payments on 1st and 2nd. Even if I paid it all to the 2nd I'm not sure it would be paid off by the end of the term which is in 6 years and 2 or 3 months.

Regarding the question about if a 15 year balloon amortizes differently... I'm by no means an expert on this, but it does not fully amortize after 15 years. The way I understand it is the payments are treated as if it were a 30 year loan. And then when the 15th year is up, whatever balance is left (balloon payment) is due in full.
You can open up a personal line of credit and just don't use it yet. Try to pay down the 2nd by throwing extra each month. Cut out some eating out, etc. and try to pay it down.

If you do find that a small balance remains in 6 years, just use the PLOC to pay it off then.

But don't do it now, since your after-tax interest rate would be higher and your payments would be higher.

If you can afford to pay off the PLOC in 48 months now, then you can afford to skip the PLOC entirely and just pay the 2nd mortgage off in 48 months (since it has a lower rate) by throwing extra at it each month so that you are paying the same amount you would to the PLOC.

I'm assuming that your 2nd mortgage rate is fixed, rather than variable. If it is in fact variable, then it might take a bit longer than 48 months if your rate resets higher in the near term. But it will not take 6 years under any realistic rate scenario.
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Old 04-17-2015, 09:23 AM
 
3 posts, read 4,170 times
Reputation: 11
Ok I guess I will just start putting all extra monthly payments to the 2nd mortgage and not the 1st and 2nd. Was hoping to pay them both down early but at the current rate I will not pay off the 2nd before the balloon is due. I believe this will take care of the full balance before the balloon is due. I should have been doing this from the start but I guess I didnt take the time to fully understand how this 2nd mortgage worked. Lesson learned, thanks for your input.
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Old 04-17-2015, 09:38 AM
 
12,404 posts, read 9,203,248 times
Reputation: 8863
You might also want to try this:

http://www.city-data.com/mortgage-calculator/?calc=3
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Old 04-17-2015, 12:46 PM
 
Location: Austin
7,077 posts, read 16,893,484 times
Reputation: 9484
Why are you putting extra to the 1st when the interest rate on the 2nd is much higher and more obvious the better choice to pay off early? Just making 1 extra payment a year can wipe out a lot of interest that is due over the life of the loan, so you really need to be putting extra to the principle on the 2nd.
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Old 04-17-2015, 01:13 PM
 
Location: Denver CO
18,977 posts, read 10,047,592 times
Reputation: 27756
Quote:
Originally Posted by stupidballoon View Post
I didn't look any further into combining them both and refinancing since they said I would have to pay PMI again.

I currently make extra payments on 1st and 2nd. Even if I paid it all to the 2nd I'm not sure it would be paid off by the end of the term which is in 6 years and 2 or 3 months.

Regarding the question about if a 15 year balloon amortizes differently... I'm by no means an expert on this, but it does not fully amortize after 15 years. The way I understand it is the payments are treated as if it were a 30 year loan. And then when the 15th year is up, whatever balance is left (balloon payment) is due in full.
ok, thanks, helps to clarify.

I'd keep throwing as much money as you can at the 2nd, and then in 4 or 5 years, see where you are. Even if not paid off in full, it should be much lower, and then you can think about ways to come up with the cash to pay it off before the 15 years are up. But I'd put every penny you can towards it - tax refund, if you get an "extra" paycheck (if you get paid every other week and have those couple of months every year with a third check), do a week of pantry meals and put what you would have spent on groceries against the loan, etc., etc. And when that's done, you'll be living lean and can start throwing all that money at the first mortgage and get that one paid down more quickly as well.
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