Short Refinance Options

If you owe more on your mortgage than what your house is worth, your alternatives to refinance this loan are limited. And that is unfortunate, as a mortgage refinance to a loan with a lower interest rate can save you significant money every month. If you have a $250,000 mortgage loan, then you can save more than $320 a month by refinancing that loan from one having an interest rate of 7 percent to one having a speed of 5 percent. Fortunately, there are some steps you can take to refinance even when your house value is short.

Home Affordable Refinance

The federal government last year launched its Home Affordable Refinance Program. This program is intended to help homeowners obtain refinancing even when they owe more on their homes than what they are worth, something that traditional mortgage lenders seldom will allow. The Home Affordable Refinance is open to homeowners who owe up to 125 percent of the home’s values. This means that a homeowner who owns a home valued at $100,000 can owe up to $125,000 on their mortgage loan. To qualify for your program, homeowners should be refinancing a loan on a house of one to four units, possess a loan owned or guaranteed by Fannie Mae or Freddie Mac and be current on their mortgage obligations.

Call Your Bank

Not all lenders are participating in the government’s refinance program. That doesn’t mean, though, they won’t refinance your house loan even if your home’s worth is short of what you owe. Lenders’ policies on refinances vary. While most traditional lenders require homeowners to get 80 percent equity before approving a refinance, others may have laxer standards. The key is for customers to shop around.

Loan Modification

Those homeowners who can’t qualify for a refinance, either through the government program or private lenders, can apply for a mortgage loan modification. Under a modification, creditors will waive homeowners’ loans so they pay less every month. This is an alternative that lenders book for homeowners who are struggling to pay their house loan payments every month and are at risk of losing their homes to foreclosure if they don’t nab a lesser monthly payment. The federal government is even encouraging lenders to modify more loans. Through its Home Affordable Modification Program, the government is providing financial incentives to lenders who modify home loans either through interest-rate discounts, by modifying loan terms or by repaying some of loans’ main balances. To see if you can be eligible for a mortgage loan alteration, if your house worth precludes you from refinancing your loan, then call your mortgage lender and explain that you can no longer manage your monthly payment.

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