In a perfect world, you would buy a home and gradually pay it off until you own it outright. But in the current housing market, where property values have declined significantly in many areas, that’s not always possible. If you owe more on your mortgage than your home is currently worth, you may be able to refinance your mortgage and get a lower interest rate.
Here’s what you need to know about refinancing when you owe more than your home is worth.
What is refinancing?
Refinancing is taking out a new loan to pay off an existing one. When you refinance your mortgage, you may be able to get a lower interest rate, which could save you money on your monthly payments. You may also be able to extend the term of your loan, which could lower your monthly payments even further.
However, it’s important to remember that when you refinance, you’re taking out a new loan, which means you’ll have to go through the application process all over again. That means going through a credit check, and you may also be required to pay fees and closing costs.
Is refinancing right for you?
Before you decide to refinance, it’s important to ask yourself a few questions.
First, how much do you owe on your current mortgage? And how much is your home worth? If you owe more than your home is currently worth, you may not be able to get a traditional refinance loan.
Second, how long do you plan to stay in your home? If you’re planning on selling soon, refinancing may not be worth it since you’ll have to pay fees and closing costs.
Third, what are your financial goals? If you’re trying to save money each month, refinancing into a loan with a lower interest rate could help you reach your goal. But if you’re trying to pay off your mortgage sooner, you may want to consider a shorter-term loan.
How to refinance when you owe more than your home is worth?
If you owe more on your mortgage than your home is currently worth, you may still be able to refinance, but you may have to look for a non-traditional loan.
One option is the Home Affordable Refinance Program (HARP), which was created by the government in 2009 to help homeowners who are struggling to make their monthly payments. To be eligible for HARP, your mortgage must be owned or guaranteed by Freddie Mac or Fannie Mae and must have originated on or before May 31, 2009.
Another option is to get a private loan from a portfolio lender. Portfolio lenders are banks or other financial institutions that keep the loans they originate from instead of selling them on the secondary market. That means they’re more willing to work with borrowers who may not qualify for a traditional loan.
You may also be able to get a short-sale loan, which is a loan used to pay off your mortgage balance and allow you to sell your home for less than what you owe. Short-sale loans are typically only available if you’re in danger of foreclosure.
If you’re considering refinancing your mortgage, make sure to compare different loan options and shop around for the best interest rate. refinancing can be a great way to save money, but it’s not right for everyone. Be sure to ask yourself some tough questions before you decide to refinance.
What paperwork is required when refinancing a mortgage?
When you refinance your mortgage in Jacksonville or elsewhere, you’ll need to provide some financial information to the lender. This includes your income, debts, and assets. You’ll also need to have a good credit score to qualify for a refinance loan.
If you’re refinancing through HARP, you may not need to provide as much documentation as you would for a traditional refinance loan. However, you will still need to have a good credit score and meet the other eligibility requirements.
Before you apply for a refinance loan, make sure you have all of the required documentation. This includes your most recent tax return, pay stubs, bank statements, and proof of any other income. You’ll also need to have a copy of your current mortgage statement.
Refinancing your mortgage can be a great way to save money, but it’s important to remember that it’s not right for everyone. Be sure to do your research and compare different loan options before you decide to refinance.