Refinance Option for Underwater Mortgage

Homeowners often find themselves wondering what their options are when it comes to their existing loans. Some are not even aware that they exist. Refinancing your loan will allow you to consolidate all of your debts into one manageable payment. You also have the opportunity to refinance simply because you no longer need the house and want to move into another area with better property value. No matter what your motivation is, refinancing may be the solution you are looking for. In this article, we will describe refinancing options for an underwater mortgage that you can use.

Why is Mortgage Refinancing Beneficial?

At first, we need to think about why people consider refinancing for an underwater mortgage. When you compare a loan with a fixed rate and a long term commitment, refinancing becomes an attractive option. Reasons to refinance an underwater mortgage:

1. Refinancing your loan will allow you to consolidate all of your debts into one manageable payment.
2. Refinance option can help lower the payments and interest rates and give you a better opportunity for paying off your debt.
3. By refinancing, homeowners can keep the home and pay it off faster, which helps them to avoid any problems with selling the property.
4. It helps to secure the equity in their home.

When you refinance your mortgage, you are effectively replacing your existing mortgage with a new one. Although your interest rates might change and your fees may change, you will not buy a new home. And because your old mortgage is not taxable, there is no reason to pay additional taxes on your refinanced mortgage payments.

If you own a home, it is almost always better to refinance than to let your underwater mortgage sit there and increase your interest rate for years on end. But find that your payment is becoming unaffordable due to one or a combination of factors. A refinance may be able to help you lower your monthly payments and improve your financial position. Besides, a refinancing might allow you to avoid foreclosure by helping you avoid the late fees associated with a foreclosure.

Home Affordable Refinance Program (HARP)

The primary requirement for borrowers to qualify for the HARP is that they must reside in a home worth less than the balance of their mortgage. To determine this value, the Internal Revenue Service considers the fair market value of the property and other relevant factors such as the location of the property, its current value, and the homeowner's income and expenses.

The homeowners who do not meet the eligibility criteria may still qualify for the program, but they will have to pay a higher initially-interest rate. Qualifying homeowners must also show that their income and expenses do not exceed the benchmark for homeowners for a particular income bracket, as determined by the Internal Revenue Service.

FHA Streamline Refinance Program

The FHA Streamlined Refinance Program not only makes it an easy snap for any homeowner to reduce their monthly mortgage payments by refinancing an over-dated FHA loan, but it also reduces the cost of the loan by up to 70%. A common misconception is that refinancing must be done through a conventional lender or the traditional loan process. Nothing could be further from the truth.

To qualify for the FHA Streamlined Refinance, a homeowner does not have to do business with a traditional lender at all. They can apply for their new home loan through one of the many approved online lenders. The FHA will even provide an appraisal that eliminates the need for a conventional lender to oversee the process.

The FHA Streamline refinance program allows you to refinance your FHA through one of the approved lenders that participate in the program. This means no fees and no PMI (payment protection insurance). You can have your FHA refinance approved within minutes, sometimes even seconds! Because these lenders are part of the program, the processing is faster, and the credit score savings are higher. The lower interest rate also saves you money each month.

Freddie Mac Enhanced Relief Refinance

Available to all homeowners as of the end of May, it's an excellent loan alternative for underwater homeowners that simply do not have enough equity built up in their house to qualify for a traditional refinanced home loan. But if you're considering a Freddie Mac Refinance, you want to make sure you've done your research and have chosen a program with the best terms and conditions for your situation.

When you decide to apply for a refinancing program with Freddie Mac, you need to know how much equity you have in your house. It's also essential to determine how much you'll need to borrow. The maximum amount of money you can borrow depends on your gross monthly income, the current value of your mortgage and the interest rate on your existing loan. In most cases, a refinancing company will provide an appraisal and an amortisation schedule to calculate the maximum amount of money you can borrow.

You should also consider your payment history when choosing a Freddie Mac loan. A good qualifying score will lower your interest rate, and the monthly payments will be easier to afford. But remember, the lowest interest rate doesn't always guarantee the most down monthly payments. If you need extra cash, consider a refinance no matter how intense your prices are now. If you qualify for a Freddie Mac Enhanced Relief Refinance and your credit rating isn't perfect, there are still ways you can reduce your payments or roll them into a new mortgage loan.

CARES Act Relief

Temporary forbearance (or pause) of mortgage payments for up to 360 times without any additional interest or fees

• No evictions or foreclosures till mid-May in the earliest
• No need to record your hardship
• No harm to your credit, should you fulfil standards

Contact your lender immediately in case you want to benefit from these provisions. You could have the ability to submit a petition for forbearance online. Otherwise, be ready for extended record times if you telephone. To know what refinance option for underwater foreclosure can be used in your state and case, call to a foreclosure attorney for details.

 What Is An Underwater Mortgage Loan?

What is an underwater mortgage? This kind of mortgage is when a homeowner takes out a loan and, at the same time, a lender extends credit to the homeowner at a higher interest rate than is usual for an individual. Usually, the interest rate on this type of mortgage is considerably higher than what one would pay if applying for a standard mortgage. In this case, the lender is taking on more risk by extending the credit.

In most cases, borrowers are not aware that they are dealing with an underwater mortgage situation. Since lenders usually have to write such loans based on their understanding of the borrowers' financial crisis, most do not realise something wrong. However, if you discover that your home equity is insufficient to make your monthly payments, you can opt to take out a mortgage refinancing to get additional cash. There are two main types of underwater mortgage refinance loans: mortgage refinancing secured by a property and unsecured mortgage refinancing that is unsecured.

Under the former type of loan, the homeowner has to put his home up as collateral to secure the loan amount. The lender will require the borrower to sign a form indicating that he understands the risks involved. Borrowers can avoid legal issues and expensive fees by ensuring that they read and understand all the terms and conditions in the contract before signing.

If the borrower fails to meet the deadline for applying, the lender can foreclose on the house. This is why it is essential to understand the fine print and avoid signing any document which is not clear and without understanding. For unsecured loans, borrowers need to make different arrangements to secure loan interest rates. There may be extra fees like balloon payment and conversion charges, making these loans costlier than regular mortgages.

It is essential to investigate adequately the options available to settle the loans. There are options to sell the home, settle by instalment or use the proceeds to pay off the principal loan. To know about these options, you can contact real estate agents who can give you a good idea about the plans. You should get in touch with your state attorneys general and find out if there are any outstanding lawsuits regarding underwater mortgage loans.

It is essential to consider the present value of your home. If you have a home loan which is more than ten years old, you may have to sacrifice a percentage of your home. Usually, the lenders have to foreclose on the property on which the loan is based upon the house’s present value. This will make the loan interest rates go higher. It can also be beneficial for you to sell the home.

However, if you don't own the home anymore, and still owe on loan, the lender must take legal action against you. In that case, the entire amount you owed will be discharged. It is also not good for your credit rating. So it is advised not to use these types of loans if you do not own the home anymore.

Despite these drawbacks, many consumers use mortgages for securing a better rate. They may have a bad credit score, but they can still qualify for a competitive rate through an underwater mortgage refinance. They can use the money to pay off the existing mortgage, which will reduce the monthly payments. This is also the best way to repair bad credit history. It is advisable to contact a mortgage broker for more details.

What Are the Advantages of an Invertebrate Mortgage?

Many underwater homeowners are wondering, is it possible to refinance an underwater mortgage? This type of mortgage is generally considered unsecured because there is no security behind the loan. For a homeowner to qualify for a refinancing option, they must prove that there is enough equity to cover all expenses and payments. Because refinancing does not eliminate a mortgage, homeowners may not qualify for a competitive rate.



The good news is there are several refinancing options available for underwater homeowners. Depending on their situation, some refinancing options are more suitable than others. If a homeowner has a large amount of equity, a refinance may be the best option. But, for homeowners who do not have enough equity, a refinance may not be a good option.

Homeowners with a lower credit score are usually better suited for second mortgages and home equity loans. A refinance is an excellent option for these homeowners as long as they have sufficient equity in their property to cover the monthly payment. The second mortgage can be used for debt consolidation or to pay off existing debts. The homeowners will not increase their credit score as much with this refinancing option.

A third refinancing option for underwater homeowners is a balloon loan. This option is the right choice for homeowners who own a home worth less than their loan value. If a homeowner takes out a second mortgage, but their credit score is high enough to qualify for a first mortgage, they can use the extra cash to pay off higher-interest debts. The homeowner will be able to increase their credit score and possibly get a competitive rate if their credit score is high enough. Homeowners can save money if they take out a second or a third mortgage.

Many underwater homeowners also qualify for a modification. The federal Truth in Lending Act has mandated that all borrowers be provided with an opportunity to renegotiate their mortgages. The homeowners can choose to keep the same mortgage, refinance it, or get a modified loan. The federal law allows for two different refinancing options. If the homeowners qualify, they will be able to keep the same mortgage.

There are many advantages to opting for an underwater mortgage refinance. One benefit is that the interest rate on the refinance is usually lower. The rates may be slightly higher for borrowers who have been late on their mortgage payments, have missed payments, or have a low credit score. But most lenders offer a competitive refinance program when borrowers meet specific criteria.

If homeowners have an underwater mortgage, there is still time to avoid a foreclosure. When the lender forecloses, the homeowner loses his or her chance at keeping the property. He or she loses the opportunity to sell the home at a later date. With a refinance, borrowers can keep their house and pay off the existing mortgage over a more extended period. The mortgage may have a few additional years to spare. And after the homeowners save enough money to pay the mortgage in full, they no longer owe the lender the mortgage’s money.

But if the homeowners do not qualify for an underwater mortgage refinance, there is still hope. Borrowers can use the equity in their homes to refinance. Equity is created by multiplying the amount of money owed on the house by the house’s current value. Then, the homeowners just have to negotiate with the lender to reduce the monthly payment or to include the principal in the charge. But again, borrowers must be aware that they must make all of the payments and not just a portion of them.