Need some advice on dealing with a homeowners association? Is a short sale your best option for unloading your home? Lawyer and real estate consultant Gary M. Singer will answer your housing questions in this space each Friday. To ask Gary a question, click here.
Q: I have a $42,000 mortgage at 8.726%. I want to refinance for a lower rate of around 4%. The property is worth half of the mortgage balance. FICO scores are 714 and 716. Do you know anyone who will refinance my underwater mortgage? – Cindy
A: No – but you may still have options. I think you may be out of luck in finding a new mortgage at any rate. Lenders will want to make sure that the loan that it gives you is fully secured by collateral. Another problem you will have is that it can be difficult to get a loan that small, even if fully secured. But I’d still call the lender and see if it will work with you on a loan modification or internal refinance. You may want to try to do a short refinance, in which your current lender agrees to accept less than it is owed and still lets you keep the house. Then you could get a new loan to refinance it. This is rare, but it does happen. Finally, because of the relatively small loan amount, you may want to look at less traditional refinancing, such as from a family member. Even 4% interest may be a lot more than that rich uncle is getting on his Certificate of Deposit, and an attorney can quickly help you draw up a private mortgage to make this a win-win.
via Ask a real estate pro: Underwater borrower should consider less traditional refinancing.