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Can I Refinance My Mortgage If My Home Is Underwater or Upside Down?

When the Real Estate bubble burst many homeowners particularly in parts of the country like California and Florida saw their property values plummet. If you were one of these homeowners you may have gone from having as much as $50,000 in equity to being under water.

The burning question for homeowners who find themselves in this situation is “Can I refinance when I owe more on my existing mortgage than my home is currently worth?” Here are several tips to help you answer this question for yourself.

When you are upside down or underwater with your mortgage loan as the terms suggest, you owe more than your home is worth. Some online lenders will tell you that you’re underwater even if you have not had a recent appraisal of your home’s value based solely on the geographic location of your property.

If the last appraisal of your home valued the property at $350,000 but your lender is telling you it’s now worth $260,000 you can still easily refinance if your mortgage is less than $200,000. The problem comes when you owe more than the property is worth, meaning you have “negative equity” in your home.

The straight answer to the question of mortgage refinancing when you’re underwater is possibly; however, there may be other options available to you. This may not be the answer you want to hear and for this I apologize but it is important to know your options when you are upside down in your mortgage loan. 100% mortgage loans are no longer available in today’s marketplace so unless you have the cash on hand to pay your mortgage down below the value of your home refinancing could be a difficult option.

If you don’t have the cash on hand there are ways to get it. Hard money lenders are one such method. A “hard money lender” is a private investor lending money to homeowners who are either upside down in their homes or are facing foreclosure. You have to be careful when dealing with private investors and observe the rule of “buyers beware” as there may be very little regulation of hard money lenders in your State.

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{ 6 comments… add one }
  • William Daniels December 10, 2009, 6:01 am

    I'm divorcing, my current mortgage is in my wife's name and I'm not on the deed. The house is valued at 185k, I'm trying to get a short sale from the lender to 150k. Can I qualify for a hard money loan?

  • Tiffany April 1, 2012, 8:18 pm

    If I still owe $190,000 on my mortgage but the market value on my house is around $90,000 then how do I refinance my mortgage under the new government program? Please help!!

    • Robert Regehr April 1, 2012, 9:47 pm

      Hi Tiffany. You can reach a HUD Mortgage Specialist at 888-995-HOPE (4673). They’ll be able to talk to you about the Home Affordable Refinance Program (HARP).

  • Queeny May 31, 2012, 10:49 am

    my mortgage is not a frannie or freddy. house worth 250000, owe 340000. current servicer and investor said they do not have any programs available to help. what should i do?

  • Vita June 9, 2012, 4:13 pm

    My mortgage is not a fannie or freddy. house worth 200000, owe 2360000. current servicer and investor said they do not have any programs available to help. what should i do?

  • Stacey October 1, 2012, 11:57 am

    I divorced in 2010 but retained the house. I am underwater on my mortage with a 6.5% interest rate. My loan is not backed by Fannie Mae or Freddy Mac and is a Conventenial loan not FHA. I have tried for a Modification and was turned down. Saying I should have an extra 400 a month after bills. That calulation was Gross salary not after insurace and taxes. Is there any help for people like me who are stuck with a large interest rate and house note?

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