A Refinance Program To Help Those With Negative Underwater Mortgage Balances

Simply put, an underwater mortgage is described as a home loan with an outstanding balance that exceeds both the fair market value of the property and the homeowner's debts. An underwater mortgage is also known as a negative equity loan or an adverse loan. Due to the fact that the property is being used as collateral, the balance of the loan becomes much greater than the value owed on the property. When the owner misses mortgage payments, this becomes a matter of serious concern for the lender and the consequences can be drastic.



To determine whether a homeowner will qualify for an adverse loan or not, it is essential to assess the true value of your home. This may need to be done with the assistance of an appraiser who has access to the market value. A true market value assessment will more accurately reflect the true value of your home, allowing you to refinance or sell your home without having to worry about an underwater mortgage. If your home is in foreclosure, you may need to consult a foreclosure lawyer to discuss the details of your particular situation and the steps you need to take in order to avoid an expensive foreclosure process.

Calculate loan-to-value ratio

This is a calculation that factors in the amount of money needed to afford a house in comparison to the current fair market value. Because the calculation is based on current prices, it may not provide accurate numbers. However, it can still provide a starting point if a homeowner wants to determine the likely hood of an adverse loan. The formula uses the following guidelines:

Amount of monthly payments required to afford a property using cash. o The interest rate on the loan plus any fees and closing costs. o The amount of principal left on the original mortgage. o The homeowner's credit rating. If a homeowner has poor credit, he or she may need to obtain a homeowner loan with a significantly higher interest rate than homes sold in traditional markets.

Negative Equity Underwater Mortgage

A negative equity underwater mortgage refers to a situation in which the homeowner borrowed more than he or she could afford and defaulted on the loan. When a loan defaults, the lender must sell the property at an auction to recoup their investment. In the past, borrowers would receive nothing as a result of a negative equity refinance. However, now many lenders are offering a negative equity refinance to borrowers who have at least one late payment on their mortgage. While the interest rates on these loans are typically a bit higher than those offered to borrowers with good credit, for borrowers with negative equity, they may be able to refinance for a rate that is within twenty percent of what their current home prices are.

In order to refinance for a negative equity, a borrower must first find out the value of his or her mortgage. After determining the mortgage balance, the borrower can then apply for a refinance. Most homeowners have already made a few mortgage payments and can qualify for a refinanced mortgage without completing a new application. There are also many homeowners who qualify for a refinanced underwater mortgage balance and are unaware that they can obtain refinanced mortgage payments in this manner.

The only drawback to refinancing for a negative underwater mortgage balance is that it often will not cover the additional debt incurred since the beginning of the current mortgage. This includes such things as car loans, credit cards, and any student loans. These loans will still need to be paid after the refinance period ends. In addition, before any new loan payments can be made, the homeowner must first submit a request to his or her lender to change the homeowner's address to that of their new lender.

Many homeowners with negative underwater mortgages are unaware that there are refinance programs available to them. The Home Affordable Refinance Program (HARP) has been around for quite some time and has recently been expanded to help homeowners in a variety of situations. Although the details of each specific program vary, many homeowners can find specific programs that can help them get back on track with their mortgage balances and home prices. If you are currently having difficulties making your monthly payments and think you may be falling behind on your mortgage, contact your lender today and ask about a refinance program that may be right for you.