A few years ago, subprime mortgages promised funding for people struggling to find a mortgage company. A booming buyer’s market brought homes that were becoming more affordable, appealing to a group of people who were looking to own a home with little money down. These mortgages promised to get these consumers into housing at low initial interest rates which would then balloon to a higher rate a few years down the road. The expectation was that these consumers would then be in a better place financially to refinance their home at a lower interest rate.
Now, many of these rates are expected to rise, and consumers are finding they cannot afford to refinance. Many find that they now owe more money than their homes are worth. Some are facing a 30% rise in their house payments. Mortgage companies are folding. Funding options are drying up.
What can you do if you’re struggling with your subprime mortgage? The following tips are from an article at Businessweek.com.
1. Boost your credit score. By fixing any dings in your credit, you may be in a better position to negotiate a better standard mortgage loan. Get a copy of your credit report. You are allowed one free copy per year! If there are any inconsistencies, outdated information or any other issues, work to get them fixed. The higher your credit score, the better your credit rating.
2. Make a deal. If you’re concerned about your mortgage, or if you’re struggling to make your payments, contact your lender about your options. Because of the high number of recent foreclosures, lenders are more likely to assist you. Some lenders are even working on special financing options for consumers who are struggling with high rates from a balloon mortgage.
3. Shop around. It helps to have a number of options available when the time comes to renegotiate your mortgage.
4. Rebalance your portfolio. In your 30’s, the majority of your financial investments should be wrapped up in your home. By your 50’s, however, real estate should be less than 50% of your financial investments. Retirees should have enough cash to weather a three year downturn in stocks. Consult with National Association of Personal Financial Advisors (napfa.org) and the Garrett Planning Network (garrettplanningnetwork.com) to help with your financial decisions.
As always, The Mike Davis Team has professionals who can explain the funding options you may have. Don’t hesitate to contact us if you have any questions about your mortgage. We are concerned about you, and want to make sure that you understand your loan.
