5 Secrets to Refinancing an Underwater Mortgage

When you purchased your home originally, you may have assumed that you would amass a small fortune in your investment over the years. While it is common for homeowners to benefit from an increase in equity over time, the reality is that some homeowners will deal with property depreciation. The combination of a high loan balance and property depreciation often results in being underwater on your mortgage. This means that you owe more money than what the property is worth. In many cases, homeowners who are underwater on their mortgage can still afford to make their payments, but the question arises about if this is a smart idea. One way to deal with this type of situation is to refinance the mortgage so that the terms are more favorable for you. These five secrets for refinancing an underwater mortgage may help you to proceed along the most intelligent and beneficial path.

Determine If Refinancing Is Right for You

Before you jump headfirst into refinancing plans, you need to carefully analyze this option to determine if it is a smart option to address your situation. You typically can obtain a loan amount that is 80 percent loan-to-value or less based on the current market value. If you crunch the numbers with this scenario, you will likely see that you need to come to the closing table with a healthy sum of money in order to pay off your existing loan. An alternative to this situation is to explore a loan modification or government assistance program to adjust your loan terms. With this type of program, you may not have to physically come out-of-pocket with the additional funds necessary to get back in the black with your mortgage.

Understand Refinance Loan Terms

If you believe that refinancing your underwater mortgage is still a thoughtful idea, you must explore possible loan terms. To qualify for a typical refinance loan program, you will need good credit scores or better. You also may need to prove that you have enough cash available to make up the difference in what is owed on your current mortgage. A few other factors that are typically reviewed by a mortgage lender when you apply for a refinance are your employment and income level. If you plan to qualify for a refinance mortgage, you need to ensure that you meet most lenders’ basic underwriting guidelines. These guidelines vary slightly from lender to lender, but you will find that they are fairly similar in many areas. If you do not meet basic and common underwriting guidelines, you may need to consider other options. For example, an alternative to avoid financial loss is to use a short sale strategy to get out of the home.

Plan to Pay the Difference

You must decide if you want to stay in the home or try to get out from under the mortgage payment. Staying in the home can be financially stressful in some situations. However, staying in the home means that you can potentially protect your credit score and avoid unnecessary moving and legal expenses. If you choose to stay in the home, start funding your mortgage with larger payments each month before you refinance. Otherwise, save additional funds that you can use to pay the difference between the current mortgage balance and the new loan. It may be helpful to get a second job and to use that income for this important purpose. The difference between the loan amounts must be addressed in some way, and paying the difference is a common and reasonable solution. Along those same lines, you can scale back your personal lifestyle to reduce expenses. By doing so, you can potentially have more money available to pay down your mortgage balance. Some common expenses to scale back include your entertainment or extra spending money expense, cable TV, your cell phone plan and more.

Talk to Your Lender

Another idea is to discuss a possible loan modification with your lender. Like refinancing a title loan, some lenders may agree to adjusting the outstanding principal balance to a level that is inline with the property’s market value. There is no guarantee that the lender will grant this request. However, if you are successful with this option, you may notice that your monthly payment decreases to a more reasonable level as well. Typically, with a modified loan, the lender will write off a portion of the debt that is owed. Some homeowners may simply accept the modified loan as their refinanced loan terms. Others may then proceed with a refinance loan application. This could potentially give you access to even better loan terms than the lender-modified loan terms

Be Patient

You may be inclined to act promptly to deal with your mortgage situation, but remember that action may not be needed immediately. Property values rarely ever increase in a straight line. At the present time, property values may be lower than they have been, but you can generally expect values to rise within a reasonable amount of time. Of course, you should plan to live in the property long enough for the value to rise to make this option feasible for you. You can always wait for the property value to increase to a sufficient level before refinancing.

Refinancing an underwater mortgage is a smart idea for some individuals, but it does take strategic planning. Carefully explore all strategies available before you proceed so that you can take the most thoughtful and strategic approach.

How to Sell Your House in a Seller’s Market

Selling your home in a seller’s market may offer a number of significant advantages over trying to sell it in a buyer’s market, but even in a seller’s market, homes can still languish on the market for a number of different reasons. Even if they don’t they still might not bring in the kinds of offers you might expect. There are certainly things you can do to help your house sell more quickly and at the best price, but they might not be what you expect. Here are 4 things you want to do when selling your home to ensure you are getting the best price – even in a seller’s market.

1. Hire a realtor

While it may be true that finding buyers is not as difficult in a seller’s market, where realtors become worth their weight in gold is at the negotiating table. The actual sales price of your home is a combination of the cash price it brings minus the concessions you will need to make. Realtors are not only experienced negotiators, but they can also help walk you through the details of all the many contracts as well.

2. Do your research

While most realtors are certainly highly knowledgeable, that doesn’t make them infallible. Even if you hire a realtor, there are still a vast number of decisions you are going to have to make for yourself throughout the process. One of the best ways you can protect yourself is to do your own research and understand the market. Then, when your realtor gives you updates, you will be better equipped to make educated and informed decisions for yourself based on the information they are giving you.

In addition to a number of apps that can help you understand market values in your area, there are also a number of finance apps that can help you understand the full financial picture of your sale. Keep in mind, there are a number of fees associated with your sale, not to mention potentially paying off an outstanding mortgage, so apps and other online tools can help you know exactly what you stand to walk away with when all is said and done.

3. Small things matter

In a seller’s market, you have the greatest ability to just put your house on the market “as is” and still attract buyers. While you can certainly do this, keep in mind that simply selling your house is not the goal, the goal is to get the highest ROI. While you may not need to do the kind of overhauling and upgrading people might need to do in a buyer’s market to get the best price, there are a number of things you should still consider doing. Here are some basic things you should still do to sell your home in a seller’s market.

• Paint the front door and trim: The front door is the “portal” to your home and little will add more charm than a fresh coat of brightly colored paint. Here are a few great design ideas for inspiration.
• Power wash the exterior: Having your house painted or installing new siding is unnecessary, but you can also significantly spruce up your curb appeal by simply removing the layer of grime and dust that tends to accumulate over the years between painting or having siding replaced.
• Fix all the little things: You may have grown used to that squeak in the floorboards or the small chip in the bathroom tile, but they also give the impression of a home tha that has not been well cared for. If you were going to sell a car, you would almost certainly take your car in to get it detailed. Consider doing the same with your home before selling.
• Upgrade lighting and faucets: You don’t have to do a complete overhaul of the kitchen and bathrooms, but some simple upgrades like new light fixtures and faucets will go a long way towards giving the kitchen and baths a new, modern look
• Update outdated vanities: Another relatively simple and easy upgrade is replacing old vanities with modern pedestal sinks or just a more modern vanity.
• Reface kitchen cabinets: A pricey kitchen remodel will rarely recoup what it cost you, but if your kitchen cabinets are old or out-of-date, you can also give them an inexpensive makeover by simply refacing them for a fraction of the cost of new ones. If your cabinets are in good shape, you can still give them an upgrade by installing new, modern hardware.

4. Have it staged

When new buyers come to look at your house, you want them to be able to imagine themselves living in your home. This means you want to make it essentially a blank canvas for them to fill in with their own furniture, belongings and possessions. As painful as it may be, you want to strip away all of your own personal taste and style and create a warm, neutral, yet inviting living space for them to picture themselves inhabiting.

While you can do this yourself, you may consider hiring a professional staging company. If you just simply strip away all of your own personal possessions and items, you may leave a stark, blank canvas behind. A professional stager will use furniture and other items to show off the best features of your home, hide the more glaring imperfections and even show buyers creative ways of using the more awkward spaces in your home.