Low Value Home Mortgage Refinancing
Article by Ask Bill
The recent drop in property value is hardly showing any signs of revival. Overall, the US property market has been somewhat flat but some regions have shown significant drops in property values. This has resulted in an increased number of problematic mortgages due to homeowners’ inability to keep up with their mortgage payments. Basically many homeowners now owe their mortgage lenders more than what their home is actually worth. This is why many homeowners are considering mortgage refinancing in order to reduce the amount they would have to pay every month. However, due to the dip in property market – double dip in some areas – refinancing has proved to be even more difficult to do as mortgage lending guidelines and rules are extremely tight. As a result of the property market dip, many homeowners have had to change their strategies when they decided to refinance their homes. The conventional mortgage refinancing was no longer viable and this forced many homeowners to change the way they approach their mortgage lenders in order to be able to refinance their homes even with the value at an all time low. Prior to meeting with their loan officers, many homeowners had to take a long hard look at their own monthly expenses in order to determine the amount that they could actually afford if their refinancing application was approved. The fact that their home values decreased but their other expenses increased probably put more hurdles in their quest for a refinancing approval from their lenders because they could not expect to reduce their other expenses by much. Once they had a logical amount in mind after careful calculations and estimations, they had to then meet up with their existing mortgage providers to discuss mortgage refinancing options for low value homes. Generally, it might have been be easier to apply for a refinance with the first mortgage provider than to convince a different mortgage lender to approve a refinance application especially if a good track record was kept with no signs of tardiness or repayment problems. They also had to keep in mind that their mortgage lenders would more likely want them to keep their homes rather than foreclosing them due to their inability to make the monthly payments. This was why the discussion with their mortgage lenders was essential because they would work together with their mortgage lender to ensure that both parties would benefit from the new arrangement. They would be able to keep their homes while the mortgage lenders would continue to receive payments; albeit at a significantly reduced amount. Discussing refinancing mortgage rate could have proven to be somewhat tricky for homeowners when the value of their homes were noticeably lower than the amount they owed their mortgage lenders. Normally mortgage lenders would want to appraise the value of a home before granting or approving refinance applications. However, with the nationwide drop in property market many mortgage lenders would have to approve many requests for underwater refinancing. With the dip in property value, mortgage lenders were more inclined to charge higher interest rates due to the risks involved in granting a refinance of a home that held little value. This was compromised by removing private mortgage insurance (PMI) to help homeowners lower their monthly payments. Many homeowners had PMI on their home loans because they did not have enough cash to put down in the first place at the time of their first home purchase. When an agreement was reached between both parties, many homeowners were able to refinance their homes and reduce their monthly financial burdens. When the government introduced the Making Home Affordable plans, there was significant increase in the number of homeowners applying for a refinance as the program made it slightly easier for them to convince mortgage lenders to approve their refinance applications.
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