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You are in a tough spot with this investment, and I would be very careful before spending any more money on it. My advice would be to ride it out.
Tom O'Leary
plannersmortgage.com
Lender rating
Since January 2009
If you are already in a 5/1 IO you probably won't be able to get a better rate given, that in a best case scenario, you would be trying to refi at 100% on investment property. That's not going to happen. I don't see that you have any choice but to ride it out and hope for a market adjustment in your favor or try and sell. What is your rate now on the 5/1 IO? I would guess that it's probably less than what you could get now and if the rents are covering your mortgage I would say leave it. Yes it's a ticking time bomb, but there really isn't a better option right now.
Hold on for now. Wells does offer conversion options with its ARM products, but it sounds like you didn't get this option initially. This would have been the correct solution since the rep was aware you preferred a fixed. This would have given you the option to convert to a fixed rate based on the current market, typically in year 4 through 7. Many things may happen in the next two years. You may sell, the market may return, etc. Also, when the loan starts to adjust Wells may be willing to discuss the conversion option at that time. They definitely won't do anything until then.
Here is a link that might just be able to help you:
https://www.wellsfargo.com/mortgage/account/fast_track
call the number on the webpage and talk with their fast track specialists. I've had two clients in somewhat simalar situations that were eligible for the fast track refi.
hopefully it will work for you too!
HLM,
Wells is the most agressive servicer to do what you were in hopes for, BUT you do not live there and it changes everything. Maybe they'll come around, but this is a question you can answer yourself.. "If you had to take a loss, when would you do it"? If you can not sleep at night...sell it now. Liek most of us in RE and stock for that matter... we seem to buy high and sell low. Sad but true. Your Down payment has already left your account and you are in hopes that it will return. But because you are simply "floating the property/interest only", you along with tens of thousands of others hope the market will return. I do as well, but have a suspicion this "storm" is worse than others and has more lingering issues. Just make sure you are not going to be "milked to death", run out of money floating it, then selling it a loss after it all. It's not pleasant to speak of "losses" but the problem is not really the loan, it is the value of the asset today versus what was paid for it several years ago. The loan is just what you/we are trained to focus on. The main reason for my "bear market" fear about housing is that last AUG, we effectively removed 40% of the "mortgage qualifying" public when the ALT A line was removed and "subprime" was officially killed. Most areas see this as inventory is stacking up and we simply don't have enough qualified buyers to puch demand/pricing up versus the standing demand. If you want to ride it... then "prime the well" and start attacking the debt... Piggyback 2nd first to get the carry cost lowered if you can get it paid off. Then hold as a rental. Not the end of your world.
Good luck
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Suggestions for Refinancing a 5/1 Interest-Only ARM
condo_owner2121
Falls Church, VA
Contributions: 12
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Ok I was stupid when I bought my first home, a condo in Northern Virginia. My real-estate broker from Wells Fargo convinced me that a 5/1 Interest Only Arm was the way to go despite my requests for the 30 yr fixed. Either way I moved out of the condo and bought a new home with my wife and was forced to rent the condo because of the depreciated value (I wasn't willig to surrender my down payment). I purchased the condo for $390K and it is now probably worth about $350K, and I put $40K down initially. I have a $311K interest only arm and a $40K 20 year fixed piggy bank financing it. The rent is currently covering all my expenses. The problem I'm having is Wells Fargo won't work with me on adjusting/refinancing the mortgage because of the low loan to value ratio and the fact that it is now considered an investment property. Should I ride it out to 2010? Should I try to find a lender that will refinance with a very low down payment? I have enough income to make up the difference between the current loan and a 30 year fixed... Any suggestions would be appreciated!
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