The housing market is starting to rebound and for millions of homeowners that is cause for celebration. People that lost the equity in their home now have a light at the end of the tunnel. The challenge is that the light is still a flicker off in the distance for many homeowners. People that purchased at the height of the housing market still have a long ways to go before they will break even, let alone capture equity. According to RealtyTrac in California 28.3% of mortgages are underwater. That means that over 1 in 4 houses have mortgages on them that are higher than what the home would sell for on the open market. Places like Florida have it much worse with 42.1% of houses having negative equity.
People that used a large down payment to purchase a home, or have owned it for over a decade, will see equity in their home faster. Those that used a low down payment loan to purchase their home may have years to go before they will have positive equity in their home. If you are one of those homeowners you can still refinance. Refinancing can help you by reducing your interest rate and monthly payment or switching from an Adjustable Rate Mortgage (ARM) to a Fixed Rate Mortgage that does not increase or decrease with market adjustments.
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Refinancing When You Owe More Than Your Home is Worth
• Contact your mortgage banker. An experienced mortgage banker will be able to guide you through the refinance option and give you access to the widest range of home loans.
• Stay current on your mortgage loan payments. If you are going through the refinance process you need to continue to make your mortgage payments, as this directly impacts your ability to qualify.
• Refinance using the HARP loan program. The Making Homes Affordable Act introduced the Home Affordable Refinance Program (HARP) to specifically help people refinance when they owe more than their home is worth.
The HARP loan program requires you to have less than 20% equity in your home. This is an extremely important distinction. Traditional loan programs want you to have over 20% equity in order to qualify or to avoid paying an additional mortgage insurance premium. That would disqualify you from the program. You can only use HARP if you have no or little equity. The majority of people that have refinanced using this home loan program have owed more than their home was worth, many up to 125% of their homes current value.
An experienced mortgage lender can help you to refinancing using HARP so that you can take advantage of low mortgage interest rates to save money on a monthly basis. By lowering your monthly mortgage payment you will increase your opportunity to stay in your home until the market rebounds enough to give you the option of selling, or remaining in the home that you love. The HARP mortgage program is in place to help millions of Americans increase their financial stability and stay in their homes. Call your mortgage banker today to learn how HARP can help you.
