In the early weeks of May it has been reported that more homeowners are applying to refinance their home loan than in previous weeks, but also, interest rates on home loans have continued to remain quite low in relation to where they were in the previous months of 2011, and this has led many homeowners to consider refinancing as a way to lower their home loan payment costs and find more affordability. However, while there are some who feel this environment is ripe for homeowners who are looking to refinance for lower costs, underwater home loans remain a major problem for individuals and may prevent them from traditionally refinancing their mortgage.
When it comes to individuals who are attempting to take advantage of rates that have recently fallen from their yearly highs, a traditional refinancing option usually has a homeowner in a situation where they will either be looking to lower their monthly mortgage payment through extending their mortgage terms to a longer repayment timeframe and lower rate, while others may look to simply lower the overall costs they will meet by shortening their repayment timeframe and lowering their home loan interest rate as well. In these cases, homeowners are usually prompted to not only research options with various lenders but make sure that refinancing will be worth the costs, said some individuals have been able to get a lower rate on their home loan, but not a substantially lower interest rate, so when closing costs have been factored in, the savings that may see could be minimal.
However, underwater home loans are still incredibly difficult for homeowners to overcome, particularly when a severe negative equity situation is in place. Homeowners may be able to apply money towards their home loan refinance agreement and make up the difference in equity versus property value, which could offer more options when it comes to refinancing, but there are some homeowners who simply do not have the funding to not only meet refinancing costs but also apply money towards their mortgage when they refinance to make up the difference they have seen in the devaluation of their property.
In these cases, homeowners must turn to options like the federal Refinance Program for underwater homeowners or talk with their state housing agency to see whether there are programs in place to help negative equity homeowners find more affordable options. While these issues have been extensively reported on over the past months, there are still some who may be unaware of the benefits that HARP or the Hardest Hit Fund may bring to homeowners in a position where they owe more on their mortgage than their home is actually worth, so many feel that these plans are worth exploring if affordability is an issue. Yet again, costs must be scrutinized by homeowners attempting to refinance their underwater home loan, as it could lead to a position where a homeowner will again end up spending more than they will save, so only those who are at risk of foreclosure may want to consider underwater refinancing at the present time, unless a great deal of affordability may be gained and a homeowner can simply afford this form of home loan refinancing.