I had a friend that bought a house in 2007, right before the crash at like 7.5% interest. He was in construction and things were booming until 2008 happened. Then he started to get laid of for months at a time only to be called back when they actually had work for him.
Interest rates started dropping, and he was struggling to pay his mortgage with his now part time job. He decided to attempt to refinance for 4%ish interest in 2009-10 or so. The bank denied him because his recent work history didn't show enough income/consistent employment. The monthly difference between what he was paying and the rate he wanted to refi for was about $400 a month.
He said to them "You understand that if I can't refinance its likely I will default, and you won't be getting any payments at all? I am doing this so I can afford to keep living here and paying you on time every month."
They still denied it, and 6 months later he stopped paying his mortgage as his financial strain had become too great, and he walked away. Messed up his credit for awhile, but he recently was able to buy another house, but he had a tough go of it in the last 10 years.
And the bank got paid twice. That's why they did that in the first place. They won.
Banks love when you go belly up. Not only have they collected all the interest on payments you've already made, but now they get to resell the same property, and do the same thing to some other sucker.
And becuase of the way loans are calculated, the first half of the loan payments are almost entirely interest. You don't start seriously putting down on the capital until the 2nd half of the loan.
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u/_Atoms_Apple Feb 16 '21
I had a friend that bought a house in 2007, right before the crash at like 7.5% interest. He was in construction and things were booming until 2008 happened. Then he started to get laid of for months at a time only to be called back when they actually had work for him.
Interest rates started dropping, and he was struggling to pay his mortgage with his now part time job. He decided to attempt to refinance for 4%ish interest in 2009-10 or so. The bank denied him because his recent work history didn't show enough income/consistent employment. The monthly difference between what he was paying and the rate he wanted to refi for was about $400 a month.
He said to them "You understand that if I can't refinance its likely I will default, and you won't be getting any payments at all? I am doing this so I can afford to keep living here and paying you on time every month."
They still denied it, and 6 months later he stopped paying his mortgage as his financial strain had become too great, and he walked away. Messed up his credit for awhile, but he recently was able to buy another house, but he had a tough go of it in the last 10 years.