What is a Short Refinance?

 

Many property owners have adjutable rate mortgages which adjusted and are now paying based on higher interest rates. Originally, the plan may have been to refinance after the initial teaser rate. Unfortunately, declining property values and changes to mortgage underwriting criteria have reduced the refinance options available. In otherwords, you're "stuck" with a mortgage at a high rate because you can't refinance like you used to.. You may have an option: A "short-refinance"

 

A short refinance is when your home is refinanced and the current mortgage holder accepts a payoff less than what is currently due. For example, if your current mortgage lender is owed $200,000 and you refinance and they accept $180,000 as a "payoff". That is a "short-refinance".

 

A short refinance is a technique available when you wish to refinance your home but the dropping housing market has wiped out much of your equity. Traditionally, you wouldn't be able to refinance because you have insufficient equity. In fact, you may even have negative equity.

 

 

Why would a bank take less than is owed?

 

With a negotiated Short Refinance, the current mortgage lender may wish to reduce the risk of foreclosure by accepting a lower payoff on the principle. They win because they have reduced the perceived risk in their portfolio. You win, because the lower monthly payment reduces your risk of financial collapse.

 

How do I start?

 

Call our office to discuss your situation and options.