I need advice before I sign a loan mod with a huge balloon payment
History: I lost my job in 2014 but continued making payments until April 2015 when I ran out of unemployment benefits. I informed my lender of my situation and that my new federal job wouldn't start until 2016 after the extensive background checks were completed. They said they would help me as there were federal programs designed to assist people like myself. I started my job in 2016 but they were still "working" on the mod. I was able to pay my old mortgage payment but told me not to make payments until they completed the mod which could get me a lower monthly and lower rate. They didn't get back to me until mid 2017 saying there wasn't anything I qualified for and the govt programs expired. I had the option to foreclose or sign over the deed...that's it! I was desperate to keep my family house. My credit went from great to bad as the months and years went by. I found a 3rd party legal services "mediator" who worked with my lender to come up with a mod and after making 3 payments to them, I finally got the lender to communicate with us.Current situation: I just received the new loan mod yesterday and I have until 3/1 to respond. My old balance was $497k but now it is $571k. My monthly payment until 2046 will now be $2623.33 (vs. the $2400 before) at 3.72% with a balloon payment of $262k at maturity. I don't understand how this works. I read that the balloon payment covers the outstanding principal balance to close out the loan. I'm not sure how I'm going to cover that in 28 years as it will be a struggle paying the monthly on my $55k salary. My intent is to keep my family home (my grandparents house that I bought to keep in the family but it is an older house that required a lot of costly repairs) and raise my kids here. Can you please help be with advice in what I should do and what my options are at this point? Again I have to respond by Thursday 3/1 with a signed agreement and my first payment. by Mamazboy_1123443 from Hilo, Hawaii. Feb 27th 2018
Daryn Ogino (Daryn_Ogino)
#30 ranked lender in Hawaii - 9 contributions
Basically your new payment is not enough to pay off the loan by 2048, so in 28 years there will be a remaining balance of $262K which will be due by you. Options are to refinance into a new loan at that time, or sell the home to pay off the loan. From the information you wrote above, this doesn't sound like a bad loan as you need time for your credit to repair itself. Another option would be to stay in the loan mod until your credit repairs itself, and then look into refinancing later. However, a fully amortized loan with a $500K+ balance would have a higher payment that what you are paying now, so if cash flow is more important then staying in the mod loan might be your best bet until the principal balance gets lower.
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