Questions on reaffirming mortgages

[jodie3134]

So I've been reading a lot on reaffirming (or not) mortgages. I totally get it why folks say not to reaffirm, but of course I can't decide on the best decision for us. Here is my situation. We currently have 2 loans. The first is about $206,000. The second is about $33,000. I have never missed a payment on either loan and I would say the value of our home is about what we owe. The terms of my first loan was make the payments for 15 years and then a balloon payment would be due (or refinance). We have been paying on this loan for 8 years - so we have 7 years until this payment is due. The second loan is a fixed home equity that we have about 9 years left on.

I am struggling with what to do in our situation. If we don't reaffirm, will we be able to refinance in the next 7 years? Lord knows I won't have that 160,000 in the bank to pay the balloon payment. Also... if things are going well and we can refinance sooner for a lower rate and maybe a regular 30 year and get rid of this crap balloon payment, I'd love to do that. I just don't know what is realistic or doable.

I am in Ohio and I have no idea what the state specific laws are. We are meeting with an attorney tomorrow so I will obviously ask about this, but wanted to get some of your expertise.

Thanks!!

[LadyInTheRed]

Assuming you qualify for the loan and have enough equity in your home, you can refinance later even if you don't reaffirm.

I don't see anything in your post that would make me think you should reaffirm. Quite the opposite. If you reaffirm and are unable to pay off that balloon because you can't get approved for refinancing, you will be in default and on the hook for any deficiency if your state law allows deficiency judgements. A reaffirmation is good for the lender, not the borrower.

[justbroke]

So long as you keep paying on-time, the fact that you didn't reaffirm a mortgage should not have an affect on obtaining a mortgage. There may be more work to do when it comes time to apply, but it should be really simple. (Because the non-reaffirmed mortgage bank may not report your mortgage payments, you may need to have them added "manually" as part of underwriting.)

I will repeat something I wrote in a post months ago. Never reaffirm anything simply for credit purposes. Reaffirmation should be for a reason other than credit scores or to have credit reporting. Others may disagree, but that's my position on reaffirmations! No one can tell you what tomorrow will look like -- job or health-wise -- and certainly not 7-9 years from now!

In fact, you may be able to negotiate a modification -- while still discharging the debt -- with the lender with a fixed-rate loan. I don't know if you qualify under the "settlement" agreements that the banks have with the U.S. Attorney General and the State Attorney Generals or under HAMP/HARP or whatever the program is today! In the end, I still don't recommend reaffirmation where it is unnecessary.

[jodie3134]

Thanks for the responses. I'm definitely leaning towards not reaffirming. My only concern is that come 7 years down the road... if our financial situation is back on track (which I'm hoping it is) we will not be able to refinance that balloon loan because the bk is on our record still and we did not reaffirm. I'm having a hard time finding how long you have to wait after filing BK to apply for a refinance with a decent rate. I've seen 4 years for a conventional loan. Anyone know if this is true?

[SMinGA2]

Whether or not your reaffirm will have virtually no impact on your refinance options in 7 years. In 7 years, your BK will be almost 7 years old and reporting regardless: reaffirmation or not. You can refinance a non-reaffirmed mortgage, assuming you qualify for the refinance.

Thanks for the responses. I'm definitely leaning towards not reaffirming. My only concern is that come 7 years down the road... if our financial situation is back on track (which I'm hoping it is) we will not be able to refinance that balloon loan because the bk is on our record still and we did not reaffirm. I'm having a hard time finding how long you have to wait after filing BK to apply for a refinance with a decent rate. I've seen 4 years for a conventional loan. Anyone know if this is true?