ARE YOUR MORTGAGE PAYMENTS CHOKING YOU? HAVE YOU CONSIDERED A SHORT REFI?

Did you know that you may be able to keep your house with a smaller principal and a smaller payment? Welcome to a short refi. This is the best of all worlds for a homeowner with payments that are choking them.

The bottom line is that in a short refinance, or short refi, the 1st lender agrees to forgive a portion of the loan balance. Then, you apply for and must qualify for an entirely different loan with a new lender. At that point, the transaction flows like any other refinance. You pay for an appraisal and all the typical title and escrow fees associated with a refinance. The new lender pays off the old lender the agreed-upon amount. Your payments are made to the new lender, with a new, lower interest rate and a new lower principal amount.

There are some very important points to keep in mind. First of all, you MUST be current. If you have had any late payments within the last year, you do not qualify for a short refi. Next, you MUST be under water or over-leveraged. That means that you owe more to the banks than the house is worth. You must also have reasonably good credit. Since you will be applying for a new loan with a new lender, you will need to meet all the new lender’s qualifications with respect to current credit score, income, savings, other debt, etc. And the most important point is that your current lender MUST agree to this proposal. Remember–they are forgiving part of the balance. Not very many of them do, and very few mortgage brokers that I know have experience closing these successfully.

 

Here are some other notes from the newly implemented FHA guaranteed short refi program: Your lender must agree to forgive at least 10% of the principal balance. So if your 1st mortgage is $400,000, the 1st lender must agree to forgive at least $40,000 (10% of $400,000). This FHA guaranteed program only applies to owner-occupied properties and only applies to 1st loans. The amount cannot exceed the current FHA guidelines in the area in which you live. Click here to find FHA loan limits in your area.

 

Also, if your current 1st loan is an FHA-backed loan, you cannot do a short refinance with this program. There may be income tax consequences as well.

 

And, finally, the total balance of loans against the property cannot be more than 115% of the appraised value of the property. For instance, if the value is $300,000, the total balances of both loans cannot be more than $345,000 (115% of $300,000). So the total of both the 1st and the 2nd mortgages, after the short refinance, cannot be more than $345,000. In some cases, this will require the 1st mortgage to forgive more than 10% or will require the 2nd mortgage to participate as well.

 

Remember, this program is voluntary for the banks. The banks MUST agree to participate. Not very many banks will agree to this. Not very many mortgage brokers have experience closing these short refinance transactions.

 

Please go to my YouTube channel http://www.youtube.com/colleencoleman to look at presentations that I’ve done about short refi, as well as other real estate topics. I look forward to being of service to you and would welcome any questions that you have. Please feel free to call me at 909-972-1616 or email me at docrealtor45@gmail.com.

 

Facebook Twitter Linkedin Email

9 Responses to ARE YOUR MORTGAGE PAYMENTS CHOKING YOU? HAVE YOU CONSIDERED A SHORT REFI?

  1. I like this weblog very much so much fantastic information.

    • Just like previously posted, if you are going to use the same lender you already have an account with them normally they do not charge for closing costs. Just make sure to call the Home Loan department with all your account information and ask them directly.Hope this helps! Daisy

  2. Some really prize blog posts on this web site , saved to my bookmarks .

    • Just like previously posted, if you are going to use the same lender you already have an account with them normally they do not charge for closing costs. Just make sure to call the Home Loan department with all your account information and ask them directly.Hope this helps!Daisy

  3. I have to express appreciation to you for rescuing me from this type of problem. Because of scouting throughout the the net and seeing solutions which are not beneficial, I was thinking my life was gone. Living without the presence of solutions to the difficulties you have sorted out all through your entire site is a crucial case, and the kind that would have in a negative way affected my career if I hadn’t encountered your web blog. Your ability and kindness in playing with all the details was priceless. I am not sure what I would have done if I had not discovered such a subject like this. I can also at this moment look forward to my future. Thanks a lot very much for the high quality and effective guide. I won’t be reluctant to recommend your web blog to anyone who needs direction on this matter.

    • You’re right those most responsible for the econonic debacle are getting a home free pass, and the rest of us are stuck footing the bills. BO Company are doing exactly the wrong things to clear up the mess, and are making things worse than ever.If you refi’d as owner occupied, generally you have to live there at least a year before renting it out. However, you have lived in the home for over 2 years now, and might be able to manage this. Check your closing docs read them thoroughly. You may have to wait a few more months. But it can take a few months to find a good tenant, too.Make sure you can get enough rent to cover mortgage, taxes, insurance and any structural repairs. The tenant on a house rental pays all utilities, and provides all interior and exterior maintenance. So trash, water, sewer, electric, gas/oil, cable, phone, and whatnot are on the tenant’s dime. And the tenant has to mow the lawn, rake leaves, shovel snow, plow the driveway, clean the gutters, wash windows inside out, and do everything that typically comes with care and maintenance of a home.Find a good tenant, and put everything in the lease. Some apartment renters are rather dim when it comes to caring for a house, so make sure they are well aware of a house-renter’s responsibilities.

    • no you will not have to pay it off.but and it is a big but! banks have been trying very hard to tihegtn up their exposures to risks, and having a equity line of credit now days is considered a risk.so the holder of second loan (equity line) may not agree for subordination,even though they are the same bank. they may also not allow you to take cash out. unless there is substantial equity exist.your best chance is going to be refinancing with the same lender,and before spending any money,you need to make certain that the line of credit holder is willing to subordinate.

  4. This is a good write-up. I will spend more time exploring this topic.

  5. Great goods from you, man. I’ve understand your stuff previous to and you are just too great. I really like what you’ve acquired here, really like what you’re stating and the way in which you say it. You make it enjoyable and you still take care of to keep it sensible. I cant wait to read far more from you. This is really a terrific web site.

Leave a Reply

Your email address will not be published. Required fields are marked *

*

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>