Elaine King's Real Estate Blog

Did you get into an interest-only payment and now cannot afford your home?  Mark Goldman, a San Diego mortgage broker, mentioned in this story, signed his clients and himself up for these interest-only products.  It was a typical scenario in 2003-2006. It was a “BUY NOW, PAY LATER” proposition that seemed good at the time.    People were looking for a way to save money on their mortgage, but now the market changed!  As the article states, people with interest only mortgages are now more likely to default because they now cannot afford their home and they cannot refinance because the home has decreased in value.  What do you do?

1) You should go see a financial planner/accountant to assist you with financial, payment and tax advice.  2) Consult a tax attorney if bankruptcy, short sale or foreclosure are your options so you are aware of your legal liabilities of these choices. 3) If you decide to sell your home as a short sale, contact a realtor who has experience in this process.  4) If you have a hardship (loss of income on a short term) contact your lender to see if you can do a loan modification.  (I understand that some lenders are contacting clients pro-actively to start this process.)   5)  This last option just became available on Fannie Mae loans.  You can now give your home back to the bank, and continue living in it by paying rent to the lender.  This program allows the ex-homeowner to live in the property for up to 12 months as a tenant.

Again, you should seek both financial and legal counsel before making any major financial decisions regarding a home sale or purchase.