Thomas Coe bought a cozy house in the Silver Lake neighborhood of Los Angeles for $559,000 in 2007. He didn't put much money down and financed the balance with a $417,000 interest-only mortgage (a loan you pay only interest on for a fixed period, then pay off the balance) that carries a 6.38% rate and a $100,000 home equity loan charging a pricey 7.88%.
Coe, who is an assistant director on feature films including Twilight, could save nearly $1,000 a month if he refinanced both loans to today's low rates. "I know my interest rates are so high right now compared to what's current," he said.
Coe was earlier denied a refinance through his lender, Bank of America, because he's underwater. But he thinks he may qualify for some relief under the $25 billion mortgage settlement, an agreement reached between the attorneys general of 49 states and the nation's five largest banks -- including Bank of America -- over foreclosure processing abuses.
As part of the settlement, about $3 billion is slated to go toward refinancing the mortgages of 750,000 borrowers who remain current on their payments.
If that doesn't pan out, Coe said he may start pinching his pennies so he can pay down enough of his balance -- roughly $40,000 or so -- that he will no longer be underwater and the bank might be more willing to refinance his loan.
By doing so, however, he'd be throwing more money at an investment that has already lost a lot of it's value -- and he'd be short on cash.
After CNNMoney called Bank of America, it said it would review Coe's case.
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|Overnight Avg Rate||Latest||Change||Last Week|
|30 yr fixed||4.36%||4.24%|
|15 yr fixed||3.39%||3.26%|
|30 yr refi||4.34%||4.22%|
|15 yr refi||3.38%||3.24%|
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