Underwater Refinancing is Tough But Not Impossible

It may be hard, but you can refinance an underwater mortgage.

Despite the real estate market picking up again, people who are looking to buy homes are not looking in non metropolitan areas, which includes the highest numbers of homes with underwater mortgages.

It is hard for homeowners who have underwater mortgages to stick around and make the payments, so many just walk away from them and kill their credit scores, while very few have tried to sell their homes and taken the lose (if they’re lucky enough to even sell the house). However, for those who are still holding onto their underwater mortgage, underwater refinancing is an option that many can try since it is not impossible, yet can be tough.

What is an Underwater Mortgage?

For those not aware of underwater mortgages, it is a home’s value that has depreciated since its purchase, but the mortgage has stayed the same. Thus, in retrospect you owe more money on a house than it is currently worth.

So for people who are looking to refinance their underwater mortgages – in order to refinance and get better interest rates, you need to have a mortgage that is worth less than the current appraised value. If your home is worth $300,000 and your mortgage is $250,000, that $50,000 difference will allow you to get some underwater refinancing. If, however, the house is worth$300,000 but your mortgage is $400,000, then you’re going to have to come up with cash to close that difference. If you can get your mortgage down below the current appraised value of your home, then you’ll be in a better place to refinance.

How to Deal with an Underwater Mortgage

There are no easy answers when it comes to having an underwater mortgage or underwater refinancing. To get some good advice on how to proceed, speak to a financial advisor.

You can also speak to a non-profit consumer advocacy group that specializes in protecting home owners. They may very well have the latest information on underwater refinancing.

There are also several programs for underwater mortgages, which may help you.