Are Short Refinances Too Good to Be True?
Every so often, you hear about a home mortgage option that sounds like a dream come true. For example, most of us must choose between a fixed rate mortgage, where the interest rate starts out high and stays the same throughout the term of the mortgage, and an adjustable-rate mortgage, where the interest rate will get higher over time, but it is not possible to know how much higher. Then you hear about 30-year mortgages where the loan agreement stipulates that the interest rate will automatically get lower over time. You are all ready to sign up for one, but then you find out that they are only available in the Netherlands, and New York has not been part of the Netherlands since the 17th century. If someone told you that you could refinance your mortgage and knock off part of the mortgage principal in the process, you would probably be incredulous. Mortgage refinances like these, known as short refinances, are not easy to find, but today’s housing market has just the right conditions for short refinances to thrive. To find out more about short refinances, contact a Bronx real estate attorney.
What Is a Short Refinance, and Where Can You Get One?
In a mortgage foreclosure case, everyone loses money. You lose your house and incur lots of expenses preparing for a move on short notice, but the lender loses, too. Instead of collecting mortgage payments with piles of interest for the lender to keep, it must pay legal fees for the foreclosure case and then pay for all the work involved in auctioning the house, or even selling it as a bank-owned property if it doesn’t sell at auction.
It is in the lender’s interest to work with you so that you can still keep the house, and keep making payments on it, even if making things right with your current mortgage is obviously beyond your means. One way to do this is for the lender simply to extend the term of your mortgage, lowering your monthly payment, but if you are underwater on your mortgage, meaning that you owe more than the house is worth, then that might not work. With a short refinance, the refinance amount is less than the value of the house, and the lender accepts that amount as a loss. In other words, you get a discount on a house you already own; the only downside is that the discounted amount counts as taxable income. The FHA offered short refinances after the 2008 mortgage foreclosure crisis, but that program ended in 2016. In today’s housing affordability crisis, short refinances could be just what we need.
Schedule a Confidential Consultation With a Bronx Real Estate Attorney
A real estate lawyer can help you if you are struggling to make your mortgage payments and need to refinance or renegotiate your home mortgage loan. Contact Cavallo & Cavallo in the Bronx, New York to set up a consultation.
Source:
finance.yahoo.com/personal-finance/short-refinance-171610742.html
