How to Refinance an Upside Down Mortgage
With the real estate market the way it is these days, many home owners are finding themselves with upside-down mortgages. That means that they owe more on their home than what it is actually currently worth. As a result, refinancing it is more difficult and more costly than a normal refinance. Fortunately, you can refinance an upside-down mortgage if you take some advice into consideration.
Other People Are Reading
Instructions
-
-
1
Evaluate your circumstances. If you are upside-down in your loan by 5 percent or more, you may not find any lending institutions that will refinance your mortgage. For example, if your home is worth $100,000 and you owe more than $105,000, you are upside-down by 5 percent. In this case, you can try to find lending institutions that will refinance your upside-down mortgage, but it will be difficult finding one willing to take the risk.
-
2
Check the current interest rates first if you are able to refinance. Rates fluctuate and you could be paying a lower rate right now than you would be if you refinanced. Higher interest rates could cost you thousands of dollars in the long run, so be sure to consider the current rates before making your decision.
-
-
3
Contact the government. The Federal Housing Administration, or FHA, is often willing to help homeowners who find themselves in financial trouble. You may be able to get a second loan (or second mortgage) on your home for the difference between the home's value and the amount you owe. For example, if you owe $120,000 on a home valued at $100,000, the FHA may give you a loan on the extra $20,000 so you can refinance the $100,000 at a lower interest rate.
-
1
Tips & Warnings
If you are currently in an adjustable-rate mortgage and you have decided to refinance, try to get into a fixed-rate mortgage. This will help ensure that your payments are the same each month rather than different amounts which can fluctuate hundreds of dollars.
Be wary of programs or advisers who suggest that you get behind on your mortgage payments on purpose so that you can negotiate a better deal with a lender. This is detrimental to your credit, dishonest and it often just makes your situation even worse.
