How Owners Can Refinance with No Equity

Did you know that you may still be able to refinance – even if you have little or no equity in your home?

With record-low interest rates holding firm, it might be wise to look at your options.

There are two big myths going around today about refinancing.

The first myth is that you need at least some equity in your home.

The second myth is that if you have less than 20% equity in your home, you will have to have mortgage insurance.

Both are false.

Which program you can use to refinance will depend on whose guidelines were used to underwrite your mortgage when you acquired it.

Chances are your mortgage was underwritten by Fannie Mae, Freddie Mac or the Federal Housing Administration (FHA).

Both Fannie Mae and Freddie Mac offer refinancing programs that allow homeowners to borrow up to at least what they currently owe on their mortgage, provided the property will appraise out to that amount.

The Federal Housing Administration has what is called a Streamline Refinance.

The Streamline Refinance allows owners to refinance without any appraisal at all, provided they meet other requirements.

For the Fannie Mae, Freddie Mac and FHA programs, owners will need to be current on their existing mortgages.

A good place to start is to call a real estate agent and get a comparative market analysis. This tells a homeowner what value an appraiser will likely return should the owner decide to refinance.

The analysis is normally done free of charge and will give the owner an in-depth analysis of what comparables are selling for in the same area, and for how much.