How to Negotiate With the Bank to Refinance Without a Hardship
A homeowner might consider refinancing his home when he can borrow at a lower interest rate than he is paying on his current mortgage. He may also want to borrow extra cash against his home equity. If the homeowner has good credit and enough equity, refinancing can probably be completed by contacting a bank or mortgage lender for a traditional mortgage. If the homeowner is capable of making the payments and not experiencing hardship, but has no equity, then the HARP program administered by the federal government is an option, as are other subprime, higher interest loans.
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Instructions
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With Equity
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1
Contact several banks or mortgage brokers to determine the refinancing interest rates in your market. Give as many details of your specific situation as possible, including the amount of equity in your home and the approximate value of your home.
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Speak with someone in the mortgage department at your bank. Detail the offers that you received from other mortgage companies to refinance your loan. If your payment history and credit is good and your property is sufficiently secured by equity, your bank may not want to lose you as a customer, and may rewrite your loan for a lower rate with minimal closing costs.
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3
Apply with another bank if you are unsuccessful in negotiating a lower rate or better terms with your own bank. Each bank has different programs concerning what it will approve and some banks have more flexibility in terms and conditions.
No Equity
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4
Calculate the value of your home and the current mortgage balance. Calculate the loan-to-value ratio of your existing mortgage. Divide the mortgage balance by the value of the home. If your home is worth $100,000 and the mortgage is for $110,000, your loan-to-value ration is 110 percent.
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Determine if your home falls under guidelines for HARP refinancing. As of publication, HARP allows Fannie Mae and Freddie Mac mortgages to be refinanced with up to a 125 percent loan-to-value ratio, providing the borrower is current on his mortgage payments and meets the other program guidelines. Restrictions also apply if the home is covered under private mortgage insurance.
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6
Apply to your current lender for refinancing under the HARP program. Your lender should be able to interpret the rules as they apply to your individual situation. You should be able to refinance at current market rates, which may be lower than what you are paying at the present time. Work with your bank to get the best possible rate at terms that are acceptable to you.
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Consult another lender if your existing mortgage holder is not offering satisfactory terms. You may be able to finance with a different bank using HARP.
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Tips & Warnings
Review the HARP program carefully at the Department of Housing and Urban Development website. Have a thorough understanding of the details before you work with a bank. If you have equity in your home but not enough for a conventional mortgage, consider an FHA mortgage, which has easier requirements. Some private lenders may also loan money directly to a borrower with no equity, but at a higher interest rate than is available through the HARP program.
Do not take a loan at an extremely high interest rate just to complete a refinancing. This could cost more in the long run and could just cover up your difficulty paying for the home. If you are seriously upside down and believe that you will have difficulty making payments, consider a short sale, HARP refinancing and other options. Consult with a financial counselor before making serious decisions concerning your home.
