A question frequently asked by listeners on Sham Ka Safar program Pravsavani at KLOK 1170 am and from me is My house is under water and my interest rate is high so I can refinance my home to benefit from todays low interest rates?
There are not too many options available in such a case. In most cases, banks need a 20% equity in the home to refinance it. So if your house is under water, meaning the current value of the home is less than the current mortgage balance, then one can refinance the 80% of the current home value and pay the difference between the refinanced amount and the current loan amount. To give a specific example, if the current loan amount is say $400K and the current market value is $300K, then you can refinance the loan amount of $240K ( 80% of $300K) and bring $160K cash to pay off the first mortgage. Obviosly, in today's economy, this option is not available to majority of the people.
The next option is to find out if you are eligible to benefit from HARP ( Home Affordable Refinance Program). This is a government program and has strict guidelines for its eligibility) . Some of the main requirements are described here.
(1) The loan should be owned by Fannie May or Freddie Mac. The borrower can call the loan servicer and and ask if the loan is owned by Fannie May or Freddie Mac. One can also check it out online by visiting the following websites- http://www.fanniemae.com/loanlookup/ and https://ww3.freddiemac.com/corporate/.
If your loan is not owned by Fannie or Freddie, then you are not eligible for HARP.
(2) You must be current on your mortgage payments ( current means should not be more than 30 days late for the last 1 year)
(3) Your current mortgage amount should not be more than 125% of your current home value.
(4) The loan amount should be less than $729K
(4) The property should be a owner occupied home
(5) You should be able to afford the new payments.
If you meet all these requirements, then you should contact your current servicer and apply for refinance under HARP program. You have to pay the cost of refinancing which should typically be less than 1% and can be recovered easily because of the reduced interest rates.
There are not too many options available in such a case. In most cases, banks need a 20% equity in the home to refinance it. So if your house is under water, meaning the current value of the home is less than the current mortgage balance, then one can refinance the 80% of the current home value and pay the difference between the refinanced amount and the current loan amount. To give a specific example, if the current loan amount is say $400K and the current market value is $300K, then you can refinance the loan amount of $240K ( 80% of $300K) and bring $160K cash to pay off the first mortgage. Obviosly, in today's economy, this option is not available to majority of the people.
The next option is to find out if you are eligible to benefit from HARP ( Home Affordable Refinance Program). This is a government program and has strict guidelines for its eligibility) . Some of the main requirements are described here.
(1) The loan should be owned by Fannie May or Freddie Mac. The borrower can call the loan servicer and and ask if the loan is owned by Fannie May or Freddie Mac. One can also check it out online by visiting the following websites- http://www.fanniemae.com/loanlookup/ and https://ww3.freddiemac.com/corporate/.
If your loan is not owned by Fannie or Freddie, then you are not eligible for HARP.
(2) You must be current on your mortgage payments ( current means should not be more than 30 days late for the last 1 year)
(3) Your current mortgage amount should not be more than 125% of your current home value.
(4) The loan amount should be less than $729K
(4) The property should be a owner occupied home
(5) You should be able to afford the new payments.
If you meet all these requirements, then you should contact your current servicer and apply for refinance under HARP program. You have to pay the cost of refinancing which should typically be less than 1% and can be recovered easily because of the reduced interest rates.
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