interest loan mortgage HELP!!?

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I am in my first year of interest only mortgage…(low mon. payment)…. my mortgage broker says that there is no money paying towards the principal balance….and its eating up my equity…..after 2 more years i will need to pay a huge amount of cash!! he also stated that i cannot refi* because of a penalty?

im a first time buyer… please help. thank you people

what do i do?….

8 Comments
  1. Reply
    Richard F
    April 30, 2011 at 12:24 am

    First, STOP listening to your mortgage broker. He/she screwed you royally.

    Go to someone you trust and ask them for a referral to a mortgage broker they trust. Take ALL your loan paperwork and ask their opinion.

    I’m in the biz. You were hosed. Your broker hosed you, especially being a first time buyer.

  2. Reply
    f_of_hypocrisy
    April 30, 2011 at 12:55 am

    They can burn in hell get another house

  3. Reply
    nghtwsl
    April 30, 2011 at 1:20 am

    i haven’t read your contract so i am not sure if this will work in your case….But if you over pay every month then what you overpay should come of the principal amount….and as far as the penalty…Allot of loans have and early buy out penalty…There business is to make money by interest. if you pay of early they don’t care but they wont all the interest on the loan….Next time read and understand what you are getting into..There are better deals out there you just gotta shop around..

  4. Reply
    Landlord
    April 30, 2011 at 1:44 am

    I had to edit, I just reread that you are in this one year.

    You bought a bad loan.

    Get your credit rating up and SAVE some money! The odds are that your house will NOT be worth what you paid in a year, the market is declining. Long term this is OK, but it means you won’t be able to sell.

    You need to plan on getting a fixed rate loan as soon as this matures. To do that you need good credit and to have enough cash to cover the difference from the amount you originally borrowed and what it will appraise for.

    And, get another broker. Anyone selling you this a year ago is a chump.

  5. Reply
    Anthony M
    April 30, 2011 at 2:39 am

    Anyone that MUST to get an interest only mortgage shouldn’t be buying a house.

    If you can’t afford a conventional loan you can’t afford the house. You are taking a gamble that the credit markets won’t change.

    Being old-fashioned when it comes to finance means being able to sleep at night.

    Your mortgage broker is correct. Interest only loans NEVER pay anything on the principal. You are betting your house will be worth alot more in a few years. At that time a smart person will refinance into a conventional mortgage. If house-value drops you are out of luck.

  6. Reply
    swg4fnc
    April 30, 2011 at 3:28 am

    Find the loan agreement and read it. Don’t go by what the broker says. When you refinance, hopefully elsewhere, he loses his commission.

    What did you think a interest only mortgage is?

    The only way the loan would eat up your equity is if the value of the house decreased. The lender wants to keep a positive equity position so if they foreclose they won’t lose any money.

    This type of shady dealings is why the mortgage industry is all screwed up.

    My advice….pay the penalty, and go to a bank, savings and loan or credit union.

  7. Reply
    Searchlight Crusade
    April 30, 2011 at 3:49 am

    1) A prepayment penalty does not legally prevent you from refinancing. It just makes it expensive to do so, probably too expensive to make it worthwhile to refinance.

    2) You really shouldn’t buy with an interest only loan. It’s indicative of buying more house than you can afford. Never buy – or accept a loan – on the basis of payment. Focus on cost of money – what the interest rate is, for how long, and how much it costs to get the loan done (points, closing cost)

    3) From what it looks like, you’ve got a 2/28 interest only, or worse, possibly a negative amortization loan (“eating up my equity,” you said). Unless you have rotten credit, there’s no reason for the first, and there’s never a reason to buy a personal residence with a negative amortization loan.

    Your agent either conned you into buying way too expensive of a property, OR you were completely hosed by your loan provider. Possibly both. Consult a real estate attorney – you may have a case against one or both of these individuals. Somebody should have advised you that the property appeared to be beyond your means.

    4) With all that said, done is done. You need to figure out what you do from here forward. If your loan does happen to be negative amortization, pay at least the interest only payment (First rule of getting out of holes: stop digging!). If it truly is interest only, at least you won’t owe more than you borrowed. Spend the next two years improving your credit. Don’t buy anything you don’t have to, especially on credit. Pay everything on time, and pay extra if you can. Then, when the ******* prepayment penalty expires, you’ll be in a position to refinance on better terms.

  8. Reply
    KHS
    April 30, 2011 at 4:17 am

    from KHS

    best answer

    for initial year principal is very low

    for 100,000 loan (interest 7% and 30 year Term)
    Monthly installment is – $ 600 and principal repayment in first year is appx $ 1000 only

    check more at given website urself

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