Question by chirailfan: Should I refinance if i owe more than my house is worth?
I have two mortgages, 1 is a 30 year fixed at 6.5% and another at 8.5% interest only. If you combine the amount i owe on both with the market, my house is no longer worth as much as i owe. However if you look at them separately, my house is worth more. Should I refinance?
Answer by GEEGEE
It’s highly unlikely any lender will consider you as a candidate for refinancing. They have all really tightened the reigns for just about all borrowers but someone in your shoes would be huge risk, even if you’re good for it.
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You won’t be able to unless you pay the difference as a lump sum.
Yes, you should refi if you can regardless of if you owe more than the house is worth.
A refi is just getting a new loan to pay off an old loan. The value of the has nothing to do with the decision*
(* As a refi is a new loan, if you owe more than it’s worth, then you’re not going to be able to get a large enough new loan to pay off the old loan because your house is collateral. You’ll have to bring money to closing, or just do a refi of that terrible 8.5% loan)
You will not be able to refinance both of these loans together due to the negative equity. Most lenders on the 1st mortgage will only due a refinance if 1st mortgage balance is under 95% loan to value and the 2nd mortgage lender will have to approve the subornation agreement. On the 1st mortgage is it a FHA loan? The FHA loans you can streamline refinance regardless of your equity. Check out hud.gov they have some good resources there.
Best of luck!
Sorry but that is not going to happen as you have no equity and in todays market they are looking for 20% With that interest only loan you actually owe more than when you took out the loan because you pay nothing on principle.
It is possible to refi the first with an FHA loan as long as the 2nd will re-subordinate.