Question re: Home loan

[CMoore515]

This isnt a question regarding me, but it's regarding my parents.

They filed chapter 7 in 2/2016, were discharged in 5/2016. They had a house loan that they were and are current on. But the loan was not reaffirmed on advice from their attorney as my dad is disabled/retired and his only income is Social Security, and my mom's income can fluctuate greatly, year to year based on the state's Medicaid system as she is my home health provider and we've suffered through reductions for the services she can bill for (so far we've fought through appeals and retained the services I need) I'm permanently disabled, by the way.

They received a call from Quicken loans and they say they can get us refinanced at 3.25% and right now they're at 5.5%, saving ~$290/month according to them, but it would put them back 'on the hook', so to speak. That's my apprehension.

Would it be smart to persue a refinance given that they aren't financially liable for the home right now and can stay as long as they pay, due to bk7?

I say no, but wanted some myFICOers opinions!

[Anonymous]

Here are my thoughts. Overall, I agree the idea of not being “on the hook” is ideal. However there are a number of factors to consider:

1) Would this refinanced loan be a FHA or VA loan? As far as I’m aware, you’re parents aren’t eligible for a conventional loan yet (minimum of 4 years post BK7). If it’s an FHA loan, you’ll want to keep an eye on the monthly PMI and closing costs. Also, keep on eye on the closing costs in general with Quicken. I had a friend recently start the refi process with them and they wanted to charge him an outrageous amount in closing costs to get to that low interest rate they show.

2) Do your parents have a decent amount of equity in the house?

3) Do they have plans to stay in the house long-term?

4) How many for years will they be extending their mortgage payments if they refinance?

[CMoore515]

1. It'd be a FHA.

2. Yes, not as much as they'd like, but not a horrible amount.

3. Depends who you ask, as I mentioned I'm permanently disabled and this house isn't conducive to me and my mobility so she worries, obviously. I use an electric wheelchair and my room is upstairs. So I have to resort to crawling but I've been doing it since we moved in, in '96. My dad doesn't see how they can swing it.

4. I'm not sure. They've been paying on it since '96. But have refinanced, specifically in '08/'09 during or after the crash. According to what I've found, the payoff is in 2040. They'll be in their 80's. I'm not keen on that myself but I was young and didn't have the voice to give my opinions as I do now.  

[homeloanexpert]

As you know, if you file bankruptcy and do not reaffirm the mortgage, you are no longer obligated to pay that debt once the BK is discharged. Getting to the root of your question, in my opinion it would be very beneficial for your parents to take advantage of almost a $300.00 reduction in payment.

Yes, their new mortgage will start reporting again and they will be on the hook for that note. But I ask you, what would be the downside of  doing it? Granted, if they miss some payments, the lender would not report to the credit bureaus, but after 90 days the lender could file “Notice the Default” which will appear on a public record. At their age, I would imagine the debt relief would be more significant and beneficial to them than having to pay the mortgage bank over 30 years.

Just a thought...

[Anonymous]

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@CMoore515 wrote:

1. It'd be a FHA.

2. Yes, not as much as they'd like, but not a horrible amount.

3. Depends who you ask, as I mentioned I'm permanently disabled and this house isn't conducive to me and my mobility so she worries, obviously. I use an electric wheelchair and my room is upstairs. So I have to resort to crawling but I've been doing it since we moved in, in '96. My dad doesn't see how they can swing it.

4. I'm not sure. They've been paying on it since '96. But have refinanced, specifically in '08/'09 during or after the crash. According to what I've found, the payoff is in 2040. They'll be in their 80's. I'm not keen on that myself but I was young and didn't have the voice to give my opinions as I do now.  

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Is there a reason they haven't considered a chair lift for the stairs? My in-laws are elderly and were able to get one installed on lease for a reasonable amount of money. (That they were later offered the option to just buy out for what again seemed very reasonable.)

It has done wonders making their current home continue to work for them.