If you are upside down on your current home mortgage loan, there is a new option for you that could save your home, your credit rating, and smooth out your financial life. Santa Monica based Mortgage Broker Bill Rayman is suggesting the use of Short Payoff Refinance Loans or Short Pay Refi.
"Our Standard FHA Mortgage Loan Programs now offer you the option of a Short Payoff Refinance loan," says Rayman. "You may have been thinking of using a Short Sale as a solution to avoid foreclosure by selling your home for less than what is owed. However, now the Short Payoff Refinance loan option is becoming a popular tool for borrowers to retain their home, while at the same time lowering the principle balance. With a lower principle, you will lower your monthly payment. And all of this is under a fixed rate FHA insured loan with the easier qualification requirements."
What's a Short Pay Refinance? There are just a few simple steps. First you must establish the current value of the home. The value must be less than is owed. The homeowner then applies for the FHA insurance to get pre-approved at the maximum loan to value for that new lower value. Now, armed with our comps at current market value and the FHA approval, the homeowner can enter into equity re-negotiations with their bank for a discount on the current mortgage. Once the bank accepts the offer the FHA insurance will allow the homeowner to secure a new loan transaction at the lower amount.
How do a person qualify for a Short Pay Refi? They must still have decent credit, fico scores, income, and no mortgage lates. If they have been late once, it makes it harder, but not always impossible. And the only other requirement is that the current value of the home must be less than the amount owed.
Why would your current lender agree to such a thing? Foreclosing on a property costs the lender money. Realtor commissions, legal fees and highly paid management staff salaries add up fast. The Short-Pay Refi results in much lower costs in legal fees, commissions, and home maintenance to the old lender.
For the homeowner's benefit, Short-Pay Refi puts them in a better position than standard loan modifications because you not only lower the payment, you also lower the principle balance with an FHA insured loan.
Bill Rayman is associated with Mortgage Capital Partners in Los Angeles and available by phone at 310-295-2900 ext 113
