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Just to be clear, this is presently an unsecured line of credit? What is your current interest rate on it now? And is the 2.77% rate fixed for the 10 years?
My house is on the line. It was a 10 year line of credit for interest (2.75%) only. My 10 years are up and total amount owing is due. The 2.77% rate is fixed.
And would half of the total (99k) be forgiven? I am calculating that $203 monthly for ten years (120 months total) equals a shade under $25,000. What happens to the other $75,000?
Is that entire amount rolled up into the modification?
I was told the $203 per month would pay off half the balance. After that, the other half would kick in with terms of the original contract. which had a variable interest rate.
If $99,000 is owed on the line, $203.01 for 120 months would pay $24,361.20, so unless there's some debt forgiveness as part of the agreement, I don't see how it could pay "half" of what is owed, and I would question their calculations. Now it's possible that it's a partial modification, but it's rare to see such a partial modification in practice.
Can you tell me if you had a history of struggling to pay what's owed?
Did you seek the modification, or did they offer it to you?
Did you see my follow up question to your issue?
I had a problem paying after my husband passed. I am a senior with ss as my only income. I had talked with home savers and they offered the modifications.
Thank you. And this is being offered through your bank (the one that you had the line with)?
Or is it another modification company?
(that would be financing the modification)?
Offered through the bank I had the line with
It's not unusual that a bank will do this to minimize its losses. Since social security is exempt from garnishment, and the foreclosure market is abysmal, the bank could be seeing this as the best option. Now the bank should give you a "Truth in Lending" disclosure, meaning that they will tell you how much in principal and interest you will actually pay in the end (at least at current rates for the adjustable one).
Again, I would question the calculations and specifically ask if there's a debt forgiveness component of this.
The fact that they say that "half" of what is owed is $24,361 (after interest) would indicate that something is not being disclosed OR there is a forgiveness of some of the debt.
(because if it really was half of what was owed, the "full" amount that would be owed would be around $48,720)
Now if they do indicate that there is a debt forgiveness aspect of this, and that the total principal that will be owed is this much, or less, then that would "add up" and then make sense.
But it's also possible that they could be rolling most of it into the 30 year mortgage, so it's something to carefully look at, particularly the Truth in Lending disclosure.
Again, it would not be unusual if they were to do this. Since they're the original lender, it's more feasible for them to forgive part of the debt to ensure the other part is paid.
Their only other recourse would be foreclosure, and like I said the foreclosure market in Michigan is such that it probably would be worse than the option that they're offering to you now.
(worse for them, that is)
And that's why they're doing it. But again, I would first make certain that you understand everything that you will be asked to pay, if anything is being forgiven, etc... before you actually sign. Just make sure that it "adds up" in the end.
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