Refinancing for 125% of The Value of Your Home
Recently, there have been some efforts to make refinancing more widely available to those who have been hit hard by housing market in the form of much lower housing values. Indeed, with housing values dropping, many homeowners have found themselves upside down on their mortgages, unable to refinance to lower rates (and payments) because of negative equity.
The first product I’ve hear about is a new offer from Nationwide. This is a building society. It is offering 125% refinancing to its current customers. Talk About Mortgages offers this on the new product:
Customers taking up this new 125% mortgage will be paying a much higher rate than current fixed rate deals making this an extremely expensive deal. This could be a positive move for those who have to move and find themselves in negative equity, but the high rates may not attract those considering a move but could just as easily hold on until the market picks up. This 125% mortgage is really a niche product.
The government is also moving to help those who have been hit hardest by declining home values. The President’s foreclosure prevention program, Making Home Affordable, recently announced that homes with 125% loan to value ratio are now eligible. Previously, the loan to value ratio was capped at 105%. In these cases, it might be possible for some to take advantage of lower mortgage interest rates and refinance their homes.
It is important to be careful, though, when you are considering refinancing. Unless you are moving in the near future, or are in danger of foreclosure, negative equity isn’t really that bad. All it means is that your home value has dropped below what you owe on the home. In most cases, riding out the current troubles will result in coming out of the negative equity when things recover and home prices start to rise again. However, you should be aware that it might be another 3-5 years before that happens.
You should also be careful for other reasons. This Countrywide commercial from before the mortgage meltdown perfectly illustrates some of the issues we have as a society when it comes to mortgages:
July 15th, 2009 at 11:20 am
[…] Refinancing for 125% of The Value of Your Home Recently, there have been some efforts to make refinancing more widely available to those who have been hit hard by housing market in the form of much lower housing values. Indeed, with housing values dropping, many homeowners have found themselves upside down on their mortgages, unable to refinance to lower rates (and payments) because of […] […]
July 22nd, 2009 at 5:49 pm
[…] Refinancing for 125% of The Value of Your Home Recently, there have been some efforts to make refinancing more widely available to those who have been hit hard by housing market in the form of much lower housing values. Indeed, with housing values dropping, many homeowners have found themselves upside down on their mortgages, unable to refinance to lower rates (and payments) because of […] […]