interest only mortgage loan?

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right now my family is at a very difficult situation because my dad could not find any construction jobs in the past year. we’ve been living off of our savings and now he hasn’t paid for the house in the past two months. he wrote the bank about refinancing the morgage loan and they offered him an interst-only loan… i don’t know much about these terms but how safe would it be? rght now he’s paying about $ 2000 a month and he hasn’t paid in two months. with the new loan agreement he doesn’t need to pay anything right but must start paying the interest amount of $ 1400 a month starting in august… of course the rate is adjustable and the interest rate is 4.75% now and can go up to 6 or 7% next year. if we don’t pay the house at all… we’ll lose it… so could he take this interest only loan and refinance in a few years to start paying for the principle amount again? or should we just go on ahead and lose the house…

4 Comments
  1. Reply
    eyeforlove
    February 16, 2011 at 9:43 pm

    He should be able to take that loan and refinance in a few years. The problem with this type of loan is that you don’t pay toward the balance of the loan unless you pay extra each month and specify that the extra go towards the balance of the loan. In away it is almost like renting except it is tax deductible.

  2. Reply
    svengteach
    February 16, 2011 at 10:19 pm

    Many of the homes that are in foreclosure right now were interest only loans. Interest only loans allow people to buy more with the thinking that they will not be in the house too long. Adjustable rates are BAD IDEAS. I would consider putting it up for sale and looking for something that fits your budget. It might mean becoming a renter, but that is something you have to consider.

  3. Reply
    tony m
    February 16, 2011 at 10:25 pm

    From the sounds of this new loan, I’m guessing that the lender might be Amtrust Bank. If it is I think they may have another option instead of the interest only. If it’s not then I think you should seriously consider the option that they are giving you right now. If you can pay the home at $ 1,400.00 per month take it, even if it’s an interest only. Alot can happen in a year from now. Hopefully you guys will be in a better financial situation and can then refinance to a fixed. Anyway your going need sometime for those late payments to not affect your credit. Also you will be one less foreclosure.

    Hope this helps.

  4. Reply
    Jeromy W
    February 16, 2011 at 10:29 pm

    difficult situation for sure, to me, your family needs to do this. yes, interest only is not the best option, but one, you would be able to save 600 a month, two, the property is not foreclosed on, 3 as long as the payment are met for a year, the two months missed may not effect his credit as much ( I say this as there may be a new credit scoring system in place soon, I’m not sure). The one poster has a point, you would not be making any paymnets towards principle, but you would have time to either sell the property and/or you dad finds a job. If you get foreclosed and continue to keep missing payments, you need to figure at least two years to repair your dad’s credit. I hope this helps

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