In this bankrate article, Tara writes in asking what she can do to save her home.
She writes:
Is it OK to try to refinance our home for a lower monthly payment even though we know that we will most likely be filing for Chapter 13 bankruptcy in three months -- when my savings run out and our second home goes into foreclosure?
We currently have an interest-only payment loan that eats up 63 percent of our monthly income.
Not only does Tara have an interest only loan that consumes 63% of their income, but they have a second home as well?
Even if their home (that they are living in) has a higher interest rate, what good would refinancing do? 63% of your income is an enormous amount to be spending on a mortgage. Tara lives in a house she can't afford, and unless she can fit herself into a 30 year fixed conventional loan, she needs to sell and start renting. But it gets worse because she has 2 homes!
I wonder how she got in such a mess? A job loss? An ARM on the second home? Need we ask about any car loans and credit card debt? Frankly, I wonder if Tara is really bankrupt. With an interest only she may well owe more than the house is worth, but it also may be possible to simply sell both houses and take a personal loan out for the difference. Is it fair to the lender that they pay for Tara's irresponsibility?
1 comment:
Only thing I can think of is they had a house, and built a new one, but couldn't sell the original. I don't know what banks approve anything over 50% of your income. The interest only part doesn't surprise me because the payment on a 30 year fixed would probably bump them to 75%. Obviously they need to sell one house but I would not go as far as to get rid of both of them. Not everyone is in the position to just pick up and go rent. The BK probably won't solve much because it just structures a payment plan for her. It is better for her to make the choices herself than to be forced into something with no choice.
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