Posted on: 23rd Sep, 2008 08:01pm
A short refinancing is a type of refinancing offer by the lender when you are in defaults on your payments. This is an excellent way to avoid the serious consequences of foreclosure. Here the mortgage lender agrees to replace your original mortgage loan with a new one with a reduced balance. The difference between the existing outstanding loan amount and the new loan amount is forgiven by the mortgage lender. The reason for the lenders supporting short refinance is that it is relatively more cost effective than foreclosure.
A short refinance is a nice mortgage innovation. It combines short sale and refinance. In short sale, your lender accepts an offer which is lower than the amount that you owe on the mortgage. Again, in refinance, you replace the original loan with a new one.
Foreclosure is indeed very costly for the lenders. Foreclosure is a lengthy process. In foreclosure, lenders not only receive any payments for nearly one year, but also they may have to incur some costs for the foreclosure process. Against this, a short refinance is certainly more cost effective than foreclosure. Moreover, with this you can also keep your home. Possible advantages and disadvantages of short finance are listed below.
A short refinance is a nice mortgage innovation. It combines short sale and refinance. In short sale, your lender accepts an offer which is lower than the amount that you owe on the mortgage. Again, in refinance, you replace the original loan with a new one.
Foreclosure is indeed very costly for the lenders. Foreclosure is a lengthy process. In foreclosure, lenders not only receive any payments for nearly one year, but also they may have to incur some costs for the foreclosure process. Against this, a short refinance is certainly more cost effective than foreclosure. Moreover, with this you can also keep your home. Possible advantages and disadvantages of short finance are listed below.
Advantages
- Offers you the chance to keep your home
- Balance on your mortgage gets reduced
- You may be offered a low rate of interest
- Your home equity is restored
- Your monthly payments may get reduced
Disadvantages
- Your credit score is hurt
- It is time consuming
- You have to qualify for it with full documentation
Related Forum Discussions
are lenders allowing short refinance? i live in florida and owe 75k more than my property is worth. i dont know what to do. things are financially tight for my family. if i get to the point of foreclosing or short selling i feel it would be in the best interest of the lender to allow a short refinance. they dont take receipt of another property & the dont have to hand all the paperwork of a short sale. in my area i do not see prices possably coming back for many years. we have huge inventories and builders with 1000 unit lots waiting for a sign to build again. thank you.
HI Octman!
Welcome to forums!
Normally lenders do not agree for short refinance when you are unable to pay the loans. They would rather go for a short sale or foreclosure. You can speak to your lender regarding short refinance and see if you make him agree. Wish you all the best.
Feel free to ask if you have further queries.
Sussane
Welcome to forums!
Normally lenders do not agree for short refinance when you are unable to pay the loans. They would rather go for a short sale or foreclosure. You can speak to your lender regarding short refinance and see if you make him agree. Wish you all the best.
Feel free to ask if you have further queries.
Sussane
Hi Octman!
Lenders will not agree for a short refinance because a short sale or a foreclosure will be more beneficial for them.
Thanks,
Jerry
Lenders will not agree for a short refinance because a short sale or a foreclosure will be more beneficial for them.
Thanks,
Jerry
we are working on a few short refinance and what we have found is that it's very similar to a short sale. you are working through the banks loss mitigation dept and every bank is different, some will allow when it makes sense and others will not. it does not hurt to try, if you are interested in finding out more, you can contact us at 888-535-0111.
I successfully negotiated a short pay refinance on our first and second mortgages. They lowered our principal balance by 100K. The problem I'm having is finding a lender to give us the new loan!! We qualify and our LTV is 80% but no bank will touch it. We've been approved with 5 banks, but in the end they back out for one reason or another. Can anyone help?
Hi Bill in California
What are the reasons that the bank is citing for not giving you the loan? It will be easier for me to answer if you can explain the situation in details.
Thanks.
What are the reasons that the bank is citing for not giving you the loan? It will be easier for me to answer if you can explain the situation in details.
Thanks.
is this for real
In a nutshell, we purchased house for 450k in 2004, the market toppled, our current lender has approved us to do a Short Pay at $239k, forgiving the balance. My Fica is about a 650 and would qualify with everything. Can't find a lender that does the ShortPay. I don't even know if that is the correct term, but it is the term my lender calls it. I look up definition of Short Payoff and it says lender will get the shorted amount at a later date. This is not the case. The lender will completely forgive the remainder of the balance. Just need a lender that can do this.
There is no telling when or if they ever will - most of the country has rebounded or crawling out of the bubble burst - it may be that they never do this - (thats my guess) as it will lose them billions if everyone upside down started asking them to write off the difference.
Let us know if there is anything else we can help with
Brian Barnes
ENG Lending
Nationwide Lender
Let us know if there is anything else we can help with
Brian Barnes
ENG Lending
Nationwide Lender
