Righting a Capsized Mortgage

Larry Lynch Real Estate News , Tips Leave a Comment

It’s a sobering statistic: almost a quarter of homeowners are upside-down in their mortgages. In a longer Wall Street Journal article which examines how forgiveness could help in speeding up our anemic economic recovery, a strong case is made for refinancing:

“Columbia University economists Glenn Hubbard, Christopher Mayer, James Witkin and mortgage-bond veteran Alan Boyce spelled out in a paper how this might work. A homeowner who owes 117% of his home’s value and who took out a 30-year loan with a 6.7% rate five years ago could refinance now into a 15-year loan with a 3.1% rate. That would increase the monthly payment by just $24. But it would leave the borrower with positive equity in less than three years, assuming home prices stay flat; within five years, the homeowner would have 17% equity. Doing nothing, the borrower would be underwater for more than seven years.”

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Larry Lynch

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