How To Get A Refinance Even With There Is No Equity

How To Get A Refinance Even With There Is No Equity



The Federal Reserve has pledged to keep rates low for an extended

period but market volatility might cause a spike in rates at any time so to

make the most of this unique opportunity is to lock at the lowest mortgage rate

by refinancing.Refinance

basically means to replace your current mortgage with a new loan that has a

more favorable interest rate and terms that you can afford to manage. This new

loan is secured on the same property as your current loan. The new loan funds

are used to pay down the current mortgage while any remaining money can be used

to your best advantage. Refinance

doesn't pay off the debt; it just restructures it.



But is refinancing of your mortgage an option for you?  To make refinancing worthwhile see if the

current interest rate is lower than what you are paying for your home

currently. It is a best practice that the difference in the rate of interest is

of at least 1 to 2 percent in order to refinance. You must also check the cost

towards refinancing and see if it is profitable in the long run. Check what







type of mortgage you have. Is it an adjustable rate mortgage (ARM) or fixed

rate mortgage (FRM)? If you have an adjustable rate loan, you may want to

refinance to switch to a fixed-interest loan but understand the terms that you

are bound by and how much you stand to gain by doing so.



If you actually owe more on your home than it is currently worth,

you may find it very difficult to find a lender willing to refinance your

current loan because of the loss of equity. Yet I will recommend not

considering foreclosure and bankruptcy protection immediately but persevere to

find a good lender to refinance. You may question who will help me with my refinance in

such situation but it just a matter of locating a reliable lender.



In the mean time it is of utmost importance that you stay up to

date with your payments. The better your payment history the more likely you

will be to obtain a favorable rate. Lesser the equity you have in the home, the

more a lender will want to see a favorable payment history and credit line







because when you pay off your debts, it will have a positive impact on your

credit.  Not only this, your credit score

will shine and boost your FICO score. Another way to attract lenders to

refinance your home is by showing a good debt to Income ratio. This ratio looks

at your monthly debt obligations (payments of interest and principal) as a

percentage of your monthly income. If you have a significant amount of debt,

your debt service burden may be too high for a lender to comfortably give you a

loan. The bank wants you to have no more than about 38% of your income as

debt.  An example will clarify this

better. If you have $4000/month in income and $1520/month of this is available

for total debt ($4000 x 38%). Of that $1520/month you already have $1000/month

in debt, leaving only $520/month for mortgage payments. In such a situation you

need to either increase your income, or cut your debts.



Some homeowners can

qualify for assistance under President Obama's "Home Affordable

modification" plan. It allows homeowners to refinance even if they owe 125

percent of their home's value on their mortgage loan. It also has a

loan-modification program to help reduce payments. You can ask your lender if

it is participating in any federal programs.



Look

out for refinance my home

plans from reliable lenders and evaluate the options provided and see if you

can find how refinance would work best for you. As you do your research it is

equally important to take this critical decision with right people who will

help you to understand better and