Mortgage expert David Reed invites Walletpop readers to ask him questions about real estate financing. Leave your questions in the comment section of this post.
Q: We went through a broker a few years ago. Our mortgage was only $62,000 at the time and he talked us into using $110,000 in equity in our home. We put new siding we fixed our bathroom then he had us refinance again. We paid off $10,000 in debt we had in 2006 and he talked us into paying off , he said put 13,000 in money market account .We don't know what to do. Each time we refinanced he said we should get 6.25% rate at in the end we ended up with 9.25% the second time he said you should be able to get 6.50% we ended up with 8.50% we can't make the 1549.00 payment and have 10,000.00 in credit card dept. We have four children, one going to college soon. Do you have any ideas? I just want to be debt free. -Trish
A: First, I'd report this broker to whomever regulates them in your state. You're promised one rate then end up with another. Twice. He talks you into using your equity in your home and invest it in a money market account. Ask him where his license is that authorizes him to give investment advice (after all, in my sometimes humble opinion), he did get compensated for his "advice."
All in all, it's called Equity Stripping and is designed to do nothing more than line your loan officers' (and I use that term very, very loosely in this instance) pockets. If you can't afford your monthly payments try finding an FHA lender and ask about the new FHA Secure mortgage which helps people in your situation. This can lower your payment and keeping your equity intact. Go to your credit union or bank this time or get a solid referral for a mortgage lender. All the best....
Real estate finance expert David Reed is president of CD REED Mortgage Bankers in Austin, TX and author of Mortgage Confidential: What You Need to Know That Your Lender Won't Tell You and Mortgages 101: Quick Answers to over 250 Critical Questions About Your Home Loan.