Question by Mallory: Why can’t you refinance a upside mortgage if you current on payments to take advantage of low interest rates?
I make my mortgage payments on time but mortgage is upside down. I’d like to lower my payment by refinancing the amount owed but banks want me to go thru gov loan modification programs. Go there and you can’t qualify because your NOT behind on your payments. If I’m on the hook for the mortgage what difference is it to the bank if I refinance the amount and put myself in a better financial situation?
Best answer:
Answer by MSAD
You can’t borrow more than the asset is worth.
At the time the bank agreed to give you money – the house was worth the amount borrowed. The bank did not loan you more than the house was worth.
You can re-fi an underwater house. You just have to have the ability to write a check for the difference between the amount of the loan and the value of the house.
Know better? Leave your own answer in the comments!
Because banks are greedy.
Let’s say you have a 5.0 percent mortgage and you want to get a 4.0 percent. You are $ 100K under water. All you want is the existing loan reduced to 4.0 percent. No,the bank won’t due that because you are under water. But you are not asking to borrow more money.
The Home Affordable Refinance Program (HARP) was designed to help underwater borrowers to take advantage of lower current rates, but in their infinite wisdom the government won’t let the banks advertise the program. Consequently, the program is rarely used since most people don’t know it exists. With the program, a first mortgage can be refinanced even if the loan amount is as much as 125% of the current appraised value. Sometimes new appraisals are not required. If you are underwater as a result of a second mortgage it gets a bit more complicated since the second mortgagee needs to agree to subordinate their interest to the new first mortgage. Some make it very easy and others refuse to cooperate even though they know they are undersecured and refinancing will only make it easier for the borrower to pay them back. If you don’t have Private Mortgage Insurance (PMI) on your current loan you won’t be required to have it on the new loan even if the home value has declined. If you have PMI many mortgage insurance companies will transfer the policy to your new loan.
Your first mortgage has to be owned by FNMA or FHLMC (check the links below) and not more than 30 days past due to qualify and rates vary according to your credit and your equity situation. You can check on the links below to find out if FNMA or FHLMC owns your loan. You don’t have to refinance with your current lender, but if you have PMI it may be easier to transfer the policy if you do. As of today you can get a 30 year fixed with no points at about 4.75% even if your first mortgage is up to 125% of current appraised value. Most lenders have these programs available but not all will lend up to the full 125%. Call a lender you trust for details.
http://www.fanniemae.com/loanlookup/
https://ww3.freddiemac.com/corporate/