Confused about the interest during the 5 yrs and after the 5 yrs...

[bayareamommy]

If we got our loan approved through the Home Affordable Modification program and lets say our loan is 2% for 5 yrs...that mean that for 5 years we are not paying off our loan right? We are just paying interest right?

I just want to make sure that I understanf all of this info correct.

Second, after the 5 years are up, is our interest rate based on our original loan (which ours is 5.5 or 5.8...cannot remember from the top of my brain, lol!)? Or is it based on current market value?

Third, after the 5 years are up, does the interest rate go up 1% each year until you reach your cap? Or does it just go to what your cap is?

Help!!!

[AzGryffindor]

Originally Posted by bayareamommy

If we got our loan approved through the Home Affordable Modification program and lets say our loan is 2% for 5 yrs...that mean that for 5 years we are not paying off our loan right? We are just paying interest right?

I just want to make sure that I understanf all of this info correct.

Second, after the 5 years are up, is our interest rate based on our original loan (which ours is 5.5 or 5.8...cannot remember from the top of my brain, lol!)? Or is it based on current market value?

Third, after the 5 years are up, does the interest rate go up 1% each year until you reach your cap? Or does it just go to what your cap is?

Help!!!

No. You would be paying principal, interest, insurance & taxes while under the mod. In addition, for every year that you successfully make your payments your servicer is supposed to credit your principal balance by $1k. So, at the end of the 5 years, $5k in principal will have been paid towards your balance.

On year 6 your interest rate will increase by 1%. It will continue to do so each year until you reach what the Freddie Mac Index rate was on the date of your permanent HAMP modification paperwork. As of today's date the rate is 5.04%.