How Can I Refinance With Little or No Equity?
How can I refinance my mortgage with no equity, or very little equity? Is refinancing even possible in a negative-equity situation?
We have been getting this question a lot lately, and there’s no mystery why. Our recent housing collapse sent many people’s home values into a downward spiral. So millions of homeowners who had positive equity two years ago now find themselves in a negative equity situation. Many of those same folks are now trying to refinance their homes, and usually for one of two reasons — (A) to get a lower interest rate or (B) to transition from an ARM loan to a fixed-rate loan. Or both!
The problem is, you need a certain amount of equity to qualify for a refinance loan. I see a lot of bloggers who are afraid to deliver bad news, so they dance around this issue. But we prefer to tell it like it is here at the Home Buying Institute. Here’s what it boils down to. If you have low equity, you’re going to have a hard time getting a refinance loan. You might be able to qualify for the government’s Making Home Affordable program. But even with this program, you cannot be upside down by more than 5%.
Here’s what the Making Home Affordable website says about it: “You may be eligible if your first mortgage does not exceed 105% of the current market value of your home. For example, if your property is worth $200,000 but you owe $210,000 or less on your first mortgage, you may be eligible.”
If you have negative equity (meaning you owe more than your home is currently worth), you’re probably out of luck altogether. I’ve spoken to a lot of lenders recently, and very few of them are offering any kind of refinance for negative equity homeowners. For obvious reasons. If you are upside down by 5% or less, you might want to check out the Making Home Affordable refinance program (see link above).
This blog post answers the question: How can I refinance with no equity? We publish a new refinancing lesson every day, five days a week. So be sure to come back often.
Frequently Asked Questions | admin | 
July 1, 2009 6:55 am
