Refinancing, Home Equity and Help for Upside Down Mortgages

Posted 07/27/2012 by Anonymous

Mortgage rates are at the lowest levels in years. For many homeowners, this would be a good time to refinance. However, due to the decrease in home values that began in 2008, many consumers are concerned that they may be paying more then their homes are worth. Before contacting a lender and paying for an appraisal there are a few things you can do.

Determine mortgage amount - Contacting your mortgage to find out exactly what the remaining balance is on your current mortgage. Keep in mind that lenders add interest on a daily basis to most loan balances. So, be prepared to give the lender two or three dates and ask what amount will be owed as of those dates.

Determine property value - Don't fall into the trap of using your current tax bill as a valuation method as this is seldom the same as true market value. Several realtors offer a "market valuation" for a nominal fee, or at no cost. Again, just remember that is merely a guideline and doesn’t represent the amount of money that your home would fetch on the open market. 

Once you have received the appropriate information, you may then determine approximately how much equity you have in your home by deducting the current market value from the amount that is owed to the lender.

What happens if you don't have "extra" equity or have an “upside down mortgage? - Negative equity occurs when the value of the home is less than the outstanding mortgage. In the current economic environment thiRe upside down homes situation may be further impacted by a decline in the value of properties in your immediate neighbor, town or city, even state. When the homeowner finds themselves owing more than their home is worth this is referred to as an “upside down” or underwater mortgage.

What is the HARP Phase II program? –  Waiting for property values to bounce back is not the only option. Though not in a position to refinance or sell, there is relief for those homeowners who find themselves underwater.The Home Affordable Refinance Program (HARP) was started in 2009 and is designed to help borrowers with Fannie Mae or Freddie Mac owned mortgages that have been unable to refinance because their property values have declined.  HARP Phase II, which went into effect March 15th 2012, expands the existing program by removing the current 125% loan to value restrictions and making even more borrowers eligible for the program.  If Fannie Mae or Freddie Mac own your loan and you are current on your mortgage payments, with or without equity in home, you may be eligible for this program.  How can HARP help you? As the government continues to purchase mortgage-backed securities, rates continue to fall and are near record lows.  HARP allows you take advantage of current market rates even if you are “underwater”.  These programs are Financial “Life-Changers”. They are also available for a limited time as determined by congress.  Act now to take advantage of this stimulus program, and lower your monthly payments. Combine low rates with shorter-term mortgage and reduce your balance owed even faster. Are you eligible? You may be eligible for HARP if you meet all of the following criteria:
  • Your mortgage must be owned or guaranteed by Freddie Mac or Fannie Mae, or have been sold to Fannie or Freddie on or before May 31, 2009.
  • Your mortgage cannot have been refinanced under HARP previously unless it is a Fannie Mae loan that was refinanced under HARP from March-May, 2009.
  • Your current loan-to-value (LTV) ratio must be greater than 80%.
  • You must be current on the mortgage at the time of the refinance, with a good payment history in the past 12 months.
 *Eligibility criteria are for guidance only.  For more information on determining Equity or on your qualification for the HARP Phase II program please contact me at Embrace Home Loans.  

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