How to Refinance When Your House Value Is Worth Less Than Your Loan?

When the value of your home is less than your mortgage balance you can refinance your loan under certain conditions. There is a program offered by the government called the Home Affordable Refinance Program that allows applicants to refinance their home if they meet certain qualifications and criteria. Your mortgage lender will be able to guide you through the process. You must be the owner of the property and you must reside in the home. The property must have between one and four units.

Instructions

1. Gather some important information about your financial status. You will need income verification such as recent tax return, list of all credit cards including balances and monthly payments, and a listing of all installment loan payments. Your mortgage lender will need this information.

2. Call your lender and determine if you qualify to refinance. The balance on your mortgage cannot exceed the fair market value of your property by more than 125 percent. If your home is valued at $150,000 the mortgage balance can be no more than $187,500, ($150,000 x 125%). Your first mortgage balance must be current and you cannot have any late payments within the last 12 months.

3. Submit an application with your mortgage servicer. Your application will be processed and you could receive a lower interest rate which leads to a lower monthly payment.

References

• Home Affordable Refinance Program: I owe more than my property is worth. Do I still qualify for a refinance under HARP?