Help with ReFinancing an Underwater Loan

[Connie Willingham]

I have a rental townhouse assessed at $114,000. Bank loan at $121,000. I'm $200 out of pocket each month to meet the mortgage and it needs a new roof. Wells Fargo owns the loan, but Bank of America services the loan. I have talked with both about lowering the interest rate (currently at 8%). They only talk about refinance or they might be able to help if I get behind in the payments. Are there any other options out there for me in Virginia?

[Jon Holdman]

"Assessed" sounds like a tax assessement. Is that right? Or do you mean a real appraisal. If you're talking about tax assessments that may or may not have much to do with the real value. So, step 1 is to figure out what its truly worth.

Realize that as an investment property you're looking at a max of 80% LTV. So, this is likely to be a "cash in" refinance. I've been there, though only a few grand. This seems more like $20K. Do you have the cash to kick in?

Is a short sale an option? That is, do you have some hardship? Lack of assets and income?

If its just a matter of you being underwater and cash flow negative as a rental, but that you have assets and income and no real hardship the lender probably won't have much sympathy. You may be stuck with a series of bad choices. 1) Hang on and lose a little each month and hope you can eventually sell with minimal cash out of pocket, 2) sell now and bring a bunch of cash to the table, 3) refi and bring a bunch of cash to the table, 4) try to do a short sale with all the fallout from that, or 5) let it go into foreclosure with all those consequences.