Refinancing Example
April 28, 2009
Helping Homeowners with the Second Lien Program: Two Cases
Family A: Amortizing Second Mortgage
In 2006: Family A took out a 30-year closed-end second mortgage with a balance of $45,000 and an
interest rate of 8.6%.
Today: Family A has an unpaid balance of almost $44,000 on their second mortgage.
Under the Second Lien Program: The interest rate on Family A’s second mortgage will be reduced to
1% for five years. This will reduce their annual payments by over $2,300.
After those five years, Family A’s mortgage payment will rise again but to a more moderate level.
Existing Mortgage
Loan Modification
Balance $43,942 $43,942
Remaining Years
27
27
Interest Rate
8.6%
1.0%
Monthly Payment
$349.48
$154.81
Savings
$195 per month, $2,336 per year for five years
Family B: Interest-Only Second Mortgage
In 2006: Family B took out an interest-only second mortgage with a balance of $60,000, an interest rate
of 4.4%, and a term of 15 years.
Today: Family B has $60,000 remaining on their interest-only second mortgage because none of the
principal was paid down.
Under the Second Lien Program: The interest rate on Family B’s interest-only second mortgage will
be reduced to 2% for five years. This will reduce their annual interest payments by $1,440.
After those five years, Family B’s mortgage payment will adjust back up and the mortgage will
amortize over a term equal to the longer of (i) the remaining term of the family’s modified first
mortgage (e.g. 27 years if the first mortgage had a 30 year term at origination and was three years old at
the time of modification) or (ii) the originally scheduled amortization term of the second mortgage.
Existing Mortgage
Loan Modification
Balance $60,000 $60,000
Remaining Years
12
27 (term reset to the
remaining term of the
modified first loan)
Interest Rate
4.4%
2.0%
Monthly Interest
$220 $100
Payments
Savings
$120 per month, $1,440 per year for five years
