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By Sean A. Kelly
The property market is, in general, unpredictable. You may never know if the value of your home would go up or otherwise. For example, nobody could foresee that property value would plummet at an all time low in the past few years. With home values dropping to a very low level, many people find it difficult to maintain their mortgages and even more difficult to make profit from the sale of their home. The value of their homes may now be significantly lower than the amount they still owe on their mortgages. At the same time, a lot of people also need to recoup their finances by reducing their monthly mortgage commitment so they may also opt to refinance with no equity.
Upside down mortgages are one of many reasons many people may have to refinance with no equity. Basically they owe more on their home than its worth but their financial circumstances may force them to consider refinancing even if they would stand to gain nothing from it. Of course, this may also prove to be quite difficult as equity is one of the basic qualifications for refinancing any type of loan. Of course you may find it more difficult to find a bank or lender who would be willing to approve an upside down mortgage refinance application. You may have better luck with mortgage brokers as they often have access to many different lenders with specialization in various types of loans including upside down mortgages. They may also help you find the best rates for your particular situation even with a home with no equity.
To be able to qualify for a no equity refinance you may be required to maintain a few things relevant to your mortgage and credit history. Chances are your potential lender or broker may run credit checks to see if you have any history of bad debt in your credit report. Considering the fact that your home no longer has enough equity to merit a refinance approval, potential lenders may put more weight on your credit rating than usual. They may want to see more favorable payment history and credit line so it may be beneficial for you to keep your credit history clean as a whistle. You may do so by making your payments on time and stay up to date on your bills. If your potential lender sees that you have an unblemished credit history you might be able to enjoy a more favorable rate even if you have no equity at all on your home.
Refinancing equity may be easier if you look for options offered by the Making Home Affordable Programs. There are various options made available for you by the government but there may be some criteria for you to possess in order to qualify for an upside down mortgage refinancing option under this particular program. For example, your current mortgage may be required to be backed by Fannie Mae or Freddie Mac. You may check online or with your mortgage provider to see where you stand. Generally your first mortgage balance may be required to be less than 125% of the home’s value. If your current mortgage possesses neither of the two criteria you may face more difficulties in trying to refinance with no equity on your home. Of course, it also may depend upon the discretion of the financial institution you may be dealing with so it may not hurt to speak to a lender to review your options.
In general, if you have no equity on your home and you wish to refinance you may end up having to face more obstacles along your way no matter which option you choose. However, you may still consider refinancing your no-equity home provided you know your options and you have a good clean credit history so that lenders may find it more difficult to say no to you.
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