Refinance HAMP loan to No Balloon?

StaceMace

LoanSafe Member
Hello-
I have a HAMP loan that originated in 2013. The principal is $139k. A deferred payment of $45k is due at the end in 2034 along with a Balloon Payment of $135k. Is it possible to refinance to say a 15 yr mortgage and get rid of the Balloon? I am starting to think of the future and how to manage this. My credit has vastly improved since I took this out. I have stable employment and the house is now worth over $300k. Any thoughts are appreciated. Thank you.
 

OneHugeMess

LoanSafe Member
You could attempt to refinance. The home would need to appraise for at least $319,000 -- and you would likely be looking at a higher interest rate, and PMI on the loan. Financially Speaking -- it would be very unwise.

Both of those Balloon Payments amount to $180,000. Right now, your paying 0% Interest on those amounts. You are only paying interest on the $139k --- and would be doubling your monthly interest payments, and probably paying $100 /150 a month in PMI.

You would be far better off -- taking the money you would spend on this refinance and higher payment, and stashing that into a high-interest savings account. This way you could accrue the money you need to pay the Balloon without paying interest on it, and even get a little bit of help from the bank. Rates are not terrific (less than a 1%, but that will hopefully increase over the next several years).

The other possibility is to simply pay down the Mortgage, with additional principal. Although -- you would need to be careful not to trigger the Balloon (which is due upon paying off your current principle of $139k, not 2034) -- and it would be less adventurous than my earlier suggestion.


Just please don't refiancne. That makes no financial sense, at all. Even if you were going from 4.5% to 2.75% -- you would still lose money.
 

StaceMace

LoanSafe Member
You could attempt to refinance. The home would need to appraise for at least $319,000 -- and you would likely be looking at a higher interest rate, and PMI on the loan. Financially Speaking -- it would be very unwise.

Both of those Balloon Payments amount to $180,000. Right now, your paying 0% Interest on those amounts. You are only paying interest on the $139k --- and would be doubling your monthly interest payments, and probably paying $100 /150 a month in PMI.

You would be far better off -- taking the money you would spend on this refinance and higher payment, and stashing that into a high-interest savings account. This way you could accrue the money you need to pay the Balloon without paying interest on it, and even get a little bit of help from the bank. Rates are not terrific (less than a 1%, but that will hopefully increase over the next several years).

The other possibility is to simply pay down the Mortgage, with additional principal. Although -- you would need to be careful not to trigger the Balloon (which is due upon paying off your current principle of $139k, not 2034) -- and it would be less adventurous than my earlier suggestion.


Just please don't refiancne. That makes no financial sense, at all. Even if you were going from 4.5% to 2.75% -- you would still lose money.
Thanks so much for the response. I was hoping there was a better option because the balloon makes me nervous, but I know what you are saying makes perfect sense.
 

Survivor_IN

LoanSafe Member
I would probably consider the term of the interest calculation. Some of these older predatory loans are built on 40 (or even 50) year amortization schedules. While in some states, these predatory terms were to be removed, many lenders did not cooperate and hid real terms on the modification. I personally would be tempted to refinance to remove the initial terms and liens by a predatory lender because you are potentially subject to future predatory servicing in these particular securitized schemes. From what your are saying, it appears your loan payments are interest only given the balloon appears to be full amount. This is a LOT of lost funds with no prospect of actual ownership at the end of the term of payments. (you must refi to pay of balance at end with a balloon)

Otherwise, I would add 200 or 300 per month on the principal. Just follow the loan closely to make sure it is properly credited and you are, in fact, paying down the principal. Beware of the many schemes on forced default. Especially forced placed insurance which can suddenly increase your payment anywhere from 50 to 500 per month while you dispute and try to repair the false charge.
 
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