Five solutions for homeowners struggling to pay their mortgage
Solutions to help pay your mortgage
To rally the nation during the Great Depression, president-elect Franklin D. Roosevelt famously remarked that "the only thing we have to fear is fear itself." But some 81 years later, his words could represent a rallying cry for homeowners who might be struggling to deal with mortgage woes.
According to industry professionals, fear can be a major factor that prevents homeowners from taking the necessary steps they need to turn their negative situations into positive ones.
"What we commonly run into is that we have people who put their heads in the sand," says Aaron Ninness, a senior loan consultant with First California Mortgage who is based in Denver, Colorado. "There are a lot of great options out there, but they require open communication with mortgage companies and (loan) servicers."
If you're a struggling homeowner, potential solutions could be well within your grasp. Read on to get a closer look at four options for people who want to remedy their mortgage situation.
Option #1: Change Your Loan's Terms
A struggling homeowner with a shorter loan term should not fear the possibility of refinancing to a long-term loan, experts contend. By extending the length of your mortgage, you could cut your monthly payments and in effect, make them more manageable.
"For people in a 15- or 20-year loan, it might be better to switch to a 30-year," Ninness says. "By making less of a payment each month, people typically are able to make ends meet."
In some instances of lengthening a term, according to Matt Jolivette, vice president of Associated Mortgage Group in Portland, Oregon, it's possible that refinancing also could lower your interest rate.
Jolivette offers this example: A homeowner could start out with a $200,000 loan on a property with a 15-year fixed-rate mortgage and a 5 percent interest rate. According to Freddie Mac, the average interest rate for a 30-year fixed-rate mortgage as of October 24, 2013 is 4.13 percent. Should the monthly principal and interest payments of $1,582 become a struggle after paying down the loan to $185,000, the homeowner could conceivably go to a 30-year mortgage with a 4.13 percent interest rate, yielding a much more manageable $897 monthly payment.
Option #2: Refinance through the HARP 2.0 Program
Distressed homeowners whose mortgages are underwater might find the latest version of the Home Affordable Refinance Program (HARP) a possible solution to their woes.
Called HARP 2.0 in its current incarnation, the program is administered by the Federal Housing Finance Agency (FHFA) and aims to give homeowners a chance to refinance their underwater mortgages. In April of 2013, it was announced the program would be extended by two years through December 31, 2015.
"HARP has been a great program," Ninness says. "The main thing [to qualify] is you have to be current with your payments."
Some of the other eligibility requirements for HARP include:
- The mortgage must be owned or guaranteed by Fannie Mae or Freddie Mac, the government-sponsored mortgage entities.
- The mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009.
- The current loan-to-value (LTV) ratio must be greater than 80 percent.