Round one of re-financing took place over the last few days.  I can already tell you, this isn't going to be a whole lot of fun.  Talk about wishing I would have known now what I did 4 ½ years ago!  To re-cap:  I purchased a home in 2005.  I elected to do an adjustable rate mortgage (ARM), interest only for 5 years.  I thought it was a good bet - a great bet actually since I did the no money down deal.  Well, we all know what has happened since then.  The fall of the housing market took place AFTER I did an equity line of credit against my house, because at the time the value easily covered it.  Now?  I am 7 months away from my rate adjusting (could be good, could be bad) and the value of my home has dropped $50,000 due to the foreclosures and bank owned properties in my neighborhood.  So I owe more on it than it is worth.

So, my research has begun - last year, in starting to decipher this problem I talked with a financial expert and we agreed that I had some time to wait out the market and re-evaluate early 2010.  Unfortunately, the market didn't do much in that timeframe, so I am back to square one.  Here is what I have learned.

I first contacted the financial institute that has my 2nd mortgage/line of equity.  That rate has always been a bit high to. I wanted to see if there were any options to getting the interest rate lowered.  That representative was extremely helpful - very knowledgeable and very honest about my options.  In regard to this part of my mortgage; there are currently no government programs that specifically address 2nd mortgages unless I can prove some sort of emergency need, which I cannot. In regard to this institution buying out my first mortgage, I am dead in the water because of the value of my home - no one will touch it, so my only option is to work with the current lender of my first mortgage.

I contacted the institution with my first mortgage and asked if I was eligible for MHA (Making Homes Affordable Act).  I first knew I was in trouble when the rep I spoke with didn't know what I was talking about....hmmm.  So, once I got him up to speed here is where I stand; I do qualify because of who my loan was originated through.  As long as I can fall into what they need, loan to value, estimated closing costs, appraisal, credit score, etc - I can re-finance with them under this program. The 2 options I have to choose from are, another ARM for 5 years, would be principal and interest and would bring my monthly payment up about $70.00, or do a fixed rate for 30 years and based on the current rates would bring my payment up about $150. Of course I could wait and see what the rate is when my ARM adjusts and hope for the best, but I am not keen on surprises.

Bottom line, yes there are options, but not many and I still have to jump through hoops to get assistance because I am not in financial crisis or risk of foreclosing.  I hate that I can only work with my current lender at this time, this limits me incredibly.  I am leaning toward the 30-year fixed, my rep made a good point, I don't know how long this program will be around and I don't know when my neighborhood will increase in value again.  Why not make it fixed and forget it.

I will let you know what I decide and how the process goes. I have a feeling it won't just be sign a few papers and be on my way; we know it is never that easy!  What I find most amusing, this is the same bank that gave me the loan to buy the house 5 years ago when I had no business buying a house. Now that I am in a better position financially, they are struggling to help me!  Sign of our times I guess.  Let me know how you are doing with your re-financing.