What should homeowners with ‘junk mortgages’ do right now?
by Mortgage Rates on Tuesday, October 19th, 2010 | 4 Comments
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let somone look at the deal you are right many borrowers are upside down now and they’re rate has adjusted and they are loosing thier homes
i would say have a good direct source look at where you are!
i still believe in getting the best fixed rate you can and even if the market takes its time rebounding so what!
you are in a 10yr I/O i would not have recomended this loan at all the reason being your payment might have been only a few dollars more without it and you are not paying any of the principle (you know that mos tof your payment is interest the first 10 years but many fell for this!
EXAMPLE: my mortgage is on 200k the amount i pay toward my principle is $19 .00 a month aprox for 10 years
IM sure they made it look good but i would really look into options you have now and wiegh them out your not saving much with what you have and there may be a more stable and safe way to go if you dont wait too long
the best direct source
Sounds like you are good for 10 years. If I had to bet, I think the market would turn around in 10 years.
There is no immediate problem as long as you can afford the payment you are currently in. A problem will happen if you haev an emergency and need to tap into extra cash. Good news: your loan is fixed. This means nothing about your loan will change for 10 years. The 10 year IO period is lengthy enough to allow you to just “hang tight.” If you’re REALLY concerned about building equity by paying down the loan balance, then you can always apply a little extra.
On a side note, during the first 10 years of paying your mortgage, very little will go towards principal even if you were NOT in an interest only loan. There is an amortization table here: http://ray.met.fsu.edu/~bret/amortize.html
Just plug in your loan amt(principal) and rate then hit calculate. Example: for a $100,000 loan at 7%, your IO payment would be $583.33 monthly. Compared to a principal + interest payment of $665.30, you save $81.97. Balances after 5 years would be: IO $100,000 and Principal + Interest: $94,000.
If you truly are interested in paying some principal down, the easiest way would be to just tack on whatever extra you can afford. If you can’t afford to do that right now, don’t worry–your mortgage will not change for another 10 years–at which point you’ll probably build some equity through property appreciation.
If you’re not planning on being in the house forever (longer than 10 years anyway) then you’ll be alright
Your loan is not considered a “junk mortgage”. This term is being used more for subprime loans, and short-term adjustable rate mortgages (which yours is not). You have a fixed rate for the next 10 years – sit tight! There is no reason to refinance your loan now!
One thing that I would recommend (as some others have) is to not just pay the interest every month; add more to your payment so that your principle balance begins to decrease. If you feel that you can’t afford to do that, make lump sum payments on your mortgage when you can – every little bit helps. Even if you only pay $50/month extra, it’s better than just paying interest. For the most part, on a 30 year fixed mortgage, you’re not paying much more than that towards the principle anyway.
Hang in there – real estate moves in cycles, and will turn around.