Mortgage Forum

Mike

HI,

I bought my home from a builder (brand new home) this past November of 2007 in the builder's first phase of sales. Its now May, 6 months have passed, and I bought the home for 745,000 and now the builder is selling my larger models for 600,000 and my model for about 550,000 as of last week.

Meaning that I've become upside down in the home over 150K. I have a 10 year fixed at 6.25% on my first and I have never been late on any payments.

DOES ANYONE THINK THAT ITS EVEN WORTH CALLING COUNTRYWIDE, MY LENDER, TO SEE IF THEY WILL MODIFY MY LOAN BALANCE?

Or does anyone have experience calling countrywide to modify an upside down loan balance?

Thanks For Any Assistance!

Zino

Sure, you have nothing to loose by trying and everything to loose if you don't.

Being upside down on a home loan as you know isn't a good situation, are you wanting to modify the loan by increasing payments to pay it out quicker?

But yes, Contact CountryWide and discuss it with them. You should always discuss your options with your lender, i have seen far too many people get in to financial difficulty due to in a way hiding from their lender hoping the problems blow over. But the truth is generally they snowball.

Also while we are on the subject of upside down loans, quite a few people don't understand what it means or how it happens so to sum it up..

An upside down loan is a situation where the loan balance is greater than the purchased item’s value. This happens when the item loses value faster than the loan balance decreases.

Amortization

Loans are paid off over time. Generally, each monthly payment goes partly towards interest costs and partly towards the loan balance. Eventually you pay off the loan balance. This is called amortization. With an amortizing loan, you want the loan balance to get to zero before the item’s value does.


How Loans Get Upside Down

You get an upside down loan when the item loses value faster than the loan balance decreases. For example, a brand new car might cost $25,000. A few years later it might only be worth $15,000. If you owe more than $15,000 on the loan, you have an upside down loan. You’ll have to write a check to sell the thing, or keep paying for it after it’s worthless.


To avoid an upside down loan, you need to pay off the loan (or have it amortize) faster than the item loses value. For auto loans, you generally want loans that last less than 5 years. Longer terms can help keep monthly payments low, but you risk having an upside down loan.


Home Loans Upside Down?

Upside down loans on houses are more complicated because you might expect houses to increase in value over long periods of time. However, the Subprime debacle starting in 2007 showed that falling home prices can create upside down loans. Certain risky mortgages can also do this.


Managing Upside Down Loans

If you find yourself with an upside down loan you need to be careful. You should decide if you need to get out from under it (at a cost) or if you’re going to let it ride. You should make extra payments if possible. For auto loans, you should investigate gap insurance to manage your risk.

So upside down home loans are tricky, however this should help explain to people wondering about upside down loans.