OUR FAULT BUT NEED ADVICE

[RUSTY101]

We need some help. In 9/06 we took out a loan for $15,000. We have payments of $224. Now here is where it is our fault. I just read every word on the contract. Our payments are only for 5 yrs, then we are suppose to pay $10,200 all at once.

Neither one of us heard her(LO) say this. Its our fault cause we did not read it.  She went over everything , or so we thought.

Any way, we will not be able to pay that lump some. Could someone please tell us what to do??

Really feel like we got done wrong, but all we can do now is try to fix the problem.

[Anonymous]

Sounds like a balloon payment.  Either refi now or wait and refi when due. 

[Lel]

If you are always current with your payments, then your lender will probably be happy to refinance the balance due into a new loan when the 5 years are up. In fact, they might start contacting you about this option before the final payment comes due. However, you can choose to refinance at any time, so long as you don't get hit with a prepayment penalty.

Since this is the Mortgage Loans forum, I assume that this is a home equity loan? Based on the numbers that you mentioned, your interest rate must be over 10%. You might be able to do better than that if you were to refinance now.

[RUSTY101]

No its not really an equity loan. It was a loan we have on some land. We both understood that it would be 11% for the 1st 5 years and then it would go down to the regular interest. We had not found this site at that time. Anyway, when lo went over everything with us, never mentioned a baloon payment after 5 years. Its totally our fault for not reading what we signed, but I feel like a LO that leaves out that info is kind of sneaky.  Anyway, contacted a CU in our area, they said that they can not do this kind of loan, no explanation tho.  I am really beginning to feel lost as what to do.  But thank you for your ideas, all of them help me think. Maybe I can come up with something that will work.

[Anonymous]

Contact debtor and ask them if they could refi with you now and extend terms or if they would be willing to talk at maturity.

Do you have other assests you could borrow against? 

[RUSTY101]

No we dont have anything else to borrow on. No family or friends with that kind of money either.

[Lel]

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@RUSTY101 wrote:

No its not really an equity loan. It was a loan we have on some land.

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Well, it is a collateralized loan, similar to a home equity loan, so I think with a little legwork you should find someone who would be willing to refinance the loan. As was mentioned previously, try to work with your lender to see if you can modify the terms of the loan. As long as you have been current with your payments, they might do it.

Your failsafe option would be to sell the land if you are unable to refinance in the next three years.

[Homeowner13]

Did you ever consider overpayment to lower the final balance? That would also look good if you do end up refinancing.

[los_west]

I would definitely try to see if refi is an option.  If you couldn't refi, are you in a position where you could apply for a personal loan at a credit union?  

[coterotie]

1. Contact the debtor and ask them what their normal procedure or what they normally do on balloon loans.  At this point don't be accusatory or anything else, just ask what the "normal" procedure is.
2. Google raw land loans in your area.  Rural credit, Credit Unions (not yours apparently but many do), land lenders or hard money guys.  This will give you some options should the original lender have a negative response.
3. Don't know what you mean by go down to the "regular" interest.  It is either a floating rate loan or a balloon loan.  Land loans in my area are in the 5% range at credit unions.  However, the LTV is limited to 75% so you will need to make sure the land will appraise properly.  2009 is kind of an iffy year for a purchase, you could have bought near the front edge of the low or just after prices rolled over.  Only you will know.  If you can't get it to appraise properly then you will have to get it paid down to what someone will finance.
4. Get out an amortization schedule and figure out what it would take additionally each month to get it paid off in two years.
5. Get your scores up enough that you could get a couple of cards that will allow enough in balance transfers to pay it off.  Keep this as your back up plan and keep the available credit to do so.