Should I accept bank's modification offer?

[kalnr78]

Quick details: I have two mortgages (193k and 46k). The house is worth 190k in the current market.

I had a financial difficulty in the last 6 months and went through the HUD process, and they got the first bank to lower interest rate from 7 to 4.5%, which lowered my monthly payment by about $150.

The second bank just mailed me a modification offer to lower my interest rate from 9% to 6%, which would lower my monthly payment by about $185 a month. Both mortgages would then be 30 year fixed.

My question is: Should I accept the second mortgage offer or reject it and attempt to get them to short-refinance it? I mean making both mortgages 30 year fixed with such low interest rates is a good thing, and it lowers my monthly payment and forgives all the late payments in the last few months, but then I end up in a house where I owe about 50k more than it's worth. Will I EVER be able to sell it? I may need to move in 5 years or so, etc.

I was told that if I accept the modification offer, they won't consider short refinancing. But if I reject it, there's no guarantee that I would get another similar offer or that they would short-refi it anyway.

Any ideas?

Note: As to how I got into this mess in the first place, it's a long story. I lost my investment property in a short-sale because no one would rent and lost 100k of equity on it among other things.

[Moe Bedard]

This is a personal decision based on your individual financial situation and we really can't advise you on whether or not to take an offer..............

you would need to look it over and see if it is able to help you out short term or long term and if that would be enough to help or not, if not............then you would need to ask what other options are available from the investor on your loan and go from there.

[kalnr78]

Is it reasonable to assume that within, say, 5 years, the house will be worth 240k again (which is where it was 3 years ago and now it's 190k)? I know no one can predict this but I hear a lot of people say that the prices of houses right before the "crash" were "artificially inflated", meaning the houses will never be worth that since it was "artificial".

[Moe Bedard]

A prediction as to where the market will be in five years is difficult for me to ascertain........... but the way I look at it personally for my situation..........and I am upside down about the same amount as you............is I will pay down on average 6k a year in principal at my current interest rate..........so in five years I would have paid down 30k of that principal........and that is o.k. with me personally................if home prices slowly rise over the next five years...............I will be in an even better position.
just my 2 cents.

[kalnr78]

.is I will pay down on average 6k a year in principal at my current interest rate..

Oh wow.. Is your interest rate like 2%?

Mine is 4.5% for the primary and 6% for the secondary. I wonder if I'd be paying down the same amount as you.

[Moe Bedard]

No, but 2% would take even more off of the principal each month............my interest rate is 5.50%

each month $437 goes to principal and I pay an extra $70
so that is $507 and at the end of the year that is $6084 off the principal each year.