If I Owe More Than My House, Can I Still Refinance?
Many homeowners decide to refinance their homes when they realize that they can’t afford to make their hefty mortgage payments. Refinancing is great for many reasons, as you can lower your monthly payments, get an adjustable fixed-rate mortgage, or simply lower your interest rate for less money owed in the long run.
On the bad side, there were many homeowners who saw their homes lose a ton of value after the market crashed. Countless homeowners now owe more on their mortgage loan than their home is actually worth presently. One might think,
“I’ll just refinance to get my head out of the sand”.
Unfortunately, refinancing your home is not easy if you haven’t built up any equity in your home. Lenders will typically only refinance if you have done so. With that said, there are a few unique ways you can approach to try and refinance your home if you are in this situation:
HARP is a wonderful program that can help people refinance their homes, even when they owe far more than the property is worth. Many borrowers have been known to refinance way over 100% of their home’s value. The biggest eligibility factor with HARP is that you cannot have missed any payments in the past year. There are also a few requirements for your credit score, which you can check out on their website.
If you have missed a few payments within the past year and can’t qualify for HARP, you can still try to get a mortgage modification through HAMP. There are a few different eligibility requirements to be aware of, such as your loan must be owned by Freddie Mac or Fannie Mae, and you also must be able to prove that you are in need of financial assistance.
So technically the loan isn’t “refinanced” with HAMP, though the modification process will make it much easier to pay off in the long run.
Talk to Your Lender
If you aren’t able to qualify for either HARP or HAMP, you should go and talk to your lender. Lenders have surely run into problems like yours before and they will typically have loan modification options available to make your payments easier.
If you completely run out of options, your best bet is to perform a short sale. It’s one of the best ways to avoid foreclosure, which would initiate unwanted fees, penalties, and legal expenses. The beauty is, lenders will typically forgive any extra money that you owe when you successfully perform a short sale.
There are always options out there, no matter how bad your circumstances are. Visit your lender and see your options to avoid staying underwater with your home payments. We hope that our small guide was helpful in your specific situation.
Have you ever experienced refinancing on a home while owing more than the value? Let us know your experience in the comments!