Small update, BIG decisions (and a question)

[five2one]

The mortgage company did file the foreclosure, but is backlogged with its loss mitigation department, so I'm still waiting to hear from them. We are hoping they will do a loan modification and give us a fresh start.

We did apply for a refi, but just got some preliminary numbers and I'm about to have a heart attack. 13% interest, 30 year mortgage. "May" have pre-payment penalties and $7000 in closing costs. Doing the math, we would only be freeing up $850 in our current budget by going that route and I don't think it's worth it. I can use the money that we *aren't* paying to the mortgage for the last few months (they blocked the account and are refusing payments) to pay off the little CCs that we have. DH is having a banner month, so if I take the extra this month and pay off the bigger CCs, we'll have freed up $500 right there. I'm trying to get him to see the light...3 more years at 6.5% or 30 more years at 13%. Seems like a no-brainer to me, but I'm having a hard time convincing him.

The problem is that it's putting pressure on him to work steadily. He hates "pressure and deadlines" (welcome to the real world, right?) and he's wanting an easy way out without seeing the long-range difficulties.

As long as the mortgage company comes back with a favorable loss mitigation response, I think we'll scrap the refi option. If they don't, then it looks like we're stuck.

The refi broker told me that we should just take it and then refi again in a year when our scores are improved, but with a possible pre-payment penalty, I'm just not sure that's a wise move...any thoughts on that???

[catlinye_maker]

My only concern with the plan of using the money that should go to the mortgage (which they are not currently accepting) for CC payments is that it may backfire if one of the conditions of a resumption of the current mortgage is that you bring the loan up to date. I would bank that money until you get a resolution one way or the other. You may need it to pay your current mortgage back payments. You may need it to cover that 7000 in closing costs. And if neither of those happen, you can then use it to pay the CC's off.

[usnavy_233]

Echoing what catlinye_maker said, it's very possible that one of the conditions of the new plan will be for you to bring the account current. Maybe they won't require it, but that's a big gamble. As for the new 13% plan, what are your options? Can you agree to the plan, then sell the place for enough to cover the penalty? If so, you could always rent for a year or two and then buy again later, all the wiser. Just food for thought.

[Ima saver]

I agree with the others, I would just save that extra money until you find out what is going to happen. But don't spend it!!

[five2one]

I did talk to the current mortgage company today and was told that they would add all of the past due to the current principal balance, so we would only have to come up with a $500 documentation fee (since it's rewriting the original mortgage) The person I've been dealing with told me that I was more than welcome to use the check they returned to me to pay off credit cards and that he would even advise it, to bring our credit score up. (I did take detailed notes in case I need them...)

Selling this house is not an option. It is a family home, on family property (in-laws are next door). My grandfather-in-law built it and we're not going anywhere unless it's on a stretcher or hubby completely loses it and we can no longer find any payment options anywhere.

I also spoke with the new mortgage company and HE said that there most likely will not be a prepayment penalty, so that's good. His thinking is that we refi at the 13%, then refi again when our credit score rebounds from paying off the extra debt.

Right now we are holding off until we see the final contract for the refi. They are including all of the CCs I'd like to pay off anyway in the deal, so the "extra" we have right now will just be the start of our emergency saving plan.