Many homeowners are facing a big problem these days. When they purchased their home, things were good, and the housing market was in better shape than it is today, and their home was priced accordingly. Now though, due to the shaky economy, many homes have actually lost value since they were purchased. This has left many homeowners, who have been making payments for years, with a home that has dropped in value, and they now owe more on the mortgage than the homes worth. For homeowners who are in this situation, there is help, and yes, mortgage refinancing may be a solution to getting into a better, more affordable, and more appropriate home loan.
Homeowners who owe more than their home is worth are considered underwater. For homeowners in this situation, one of the first things they should do is contact their current mortgage lender or bank. Some lenders and banks have entire departments dedicated to refinancing. They would be able to point a underwater homeowner in the right direction due to having the experience, contacts, and resources to make things happen.
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These days, many lenders and banks will attempt to help homeowners by trying to get them a mortgage refinancing through President Obamas HARP ( Home affordable refinance program ) stimulus. This stimulus plan is actually designed to help homeowners who are underwater and have a mortgage that is ultimately backed by either Fannie Mae or Freddie Mac. Most reputable mortgage lenders and banks are using HARP to help homeowners, but some of them do not. The few places that don't though typically offer their own in house offers that are similar. This may not have been true in the past, but these days, with the economy in tough shape and the struggling housing market, lenders and banks are offering mortgage refinancing offers to homeowners who would not be able to get them in the past.
Other options for underwater homeowners include negotiations with their current mortgage lender. While not a full on modification, some homeowners will be able to convince their lender to lower the principal due, or even slightly adjust the home loan interest rates, to help the homeowner get a more affordable monthly payment. This will not always be possible though, and some banks will not even entertain the idea. If an underwater homeowner is able to bring a good amount of cash to the table though, negotiations may go a little easier. The money will be used to pay down a chunk of the home loan, and make it easier for a mortgage lender to work with you.
Some homeowners may be tempted to get a mortgage modification instead of a refinance. However, for a struggling homeowner who is underwater, this is not generally a good idea. A loan modification is just that. It merely modifies the current loan to make the monthly payment affordable. There are no true savings to be had, just longer repayment terms, and more cost in the long run. A mortgage refinancing is replacing the existing loan with a new one that has more favorable interest rates, terms, and conditions which will lower the monthly mortgage payment, and save a homeowner money.
Many homeowners are underwater and struggling to find a way to right the ship. With the new Government mortgage stimulus programs, help is now available. Some homeowners will not qualify for a loan refinance, which is a sad, but true fact. For these homeowners, their options will be severely limited. Homeowners should take action now before their situation gets any worse.
Can I Refinance My Home If I Owe More Than My House Is Worth?
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