How to Turn a Second Balloon Mortgage Into a Fixed Rate

Reworking your home loan to eliminate a balloon payment on a second mortgage could help you avoid a bind. You could find yourself facing foreclosure if the balloon payment comes due and you don't have the money. Contact the lender on your first mortgage, as soon as possible, about reworking your loan, especially if the balloon payment is coming up soon. Even if you have the money for the balloon payment, you should explore alternatives. A new loan may save you money and allow you to keep the balloon payment in the bank.

Instructions

1

Contact a housing counselor certified by the government. The Federal Trade Commission reports that the one thing you should not do is seek help from a for-profit loan modification firm. These firms often advertise themselves as "foreclosure rescue" firms, but many are scam artists, according to the FTC. Instead, make an appointment with a housing counselor approved by the U.S. Department of Housing and Urban Development. Find a counselor in your city by checking the HUD website.

2

Show the counselor all of your current loan documents, including the first mortgage and the second mortgage with the balloon payment. Tell the counselor about your credit and debt situation as you ask her advice on how to proceed.

3

Ask the counselor to contact your lender and request a loan modification if you are struggling financially and possibly already behind on your payments. The lender can modify or refinance your loans to give you a fixed rate without a balloon payment. Consider the expert knowledge of the housing counselor, as an asset, as you prepare to speak with your lender. Make a three-way call to the lender with you and the counselor on the line to begin.

4

Shop around for a new mortgage if your financial situation is sound, the balloon payment is not a pressing issue and all you need is a standard refinancing. Authorize the housing counselor to pull your credit to determine your credit score as she recommends local lenders for the refinancing.

5

Rid yourself of the second mortgage and balloon payment through a loan modification or a standard refinancing.