Monday, August 31, 2009

The Mortgage Refinance Deadend

Like many others, I own a home which potentially had it's value fall substantially. When I bought it, I got a first and second mortgage at an interest rate much higher than rates available today.

The obvious and 'smart' thing to do, not to mention what I had plan to do from the beginning is to refinance, and pay off the loans sooner and cheaper. And then this crisis hit. And the value of the home is assumed unimaginable. Banks refuse to consider refinancing - because they can't calculate enough equity ratio to debt.

My bank said - try the 'Obama plan', so I checked it out - and this is what it would result in: You send in forms, not knowing how long it takes to get a response, and not knowing what kind of 'discount' you'd get on your interest rate. And that rate would be temporary. You'd also have to prove that somehow your financial situation has worsen, loss of wages or other such issues.

It is obviously not a 'refinance' option. It's a temporary - send a lottery ticket - hope for a government delay.

To my taste - it is not what I'm looking for. I was looking for a responsible upgrade to my debt, which would allow to eventually pay off my mortgage - and it is evident that this door is shut. Banks will not cooperate - and the government solution is anything but.

The only valid action I can foresee - is to plan for paying down my mortgage fast and soon on the expense of potential personal savings and family related goals. It seems apparent to me - that one has to take his own fortune in his own hands. Making use of time tested debt pay down techniques.


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