2008/12/Thinking Of Refinancing Better Think

I know I may be stating the obvious here and I’m sure someone else has posted something similar, but I’m going to rant about our banking system as it pertaining to refinancing.

So lets say you purchased a home for $350,000, 2-3 years ago and put down 15% and your mortgage rate is 6.25%. Well, now rates are at or below 5% and you would like to refinance and save a few hundred dollars a month, so you contact the bank your existing mortgage is with and fill out the appropriate paperwork. The bank then sends an appraiser out to look at your home (it’s probably just a drive-by) and then informs you that your home is worth about what you owe on it currently and that you will not be able to refinance.

Now if you are like most people your reaction is, what? Why not? So my loan that is already with your bank, that I’ve never been late on, can not be refinanced at a lower rate? The loan officer then tells you that they are sorry, there is nothing they can do.

Now here is where it gets interesting. Lets say upon learning this that you decide to skip a few mortgage payments and you can prove that you’re having a difficult time making your mortgage payments, the bank will then try and work with you and may possibly lower your mortgage rate temporarily or in some cases permanently. Sure your credit score will take a hit, but if you don’t plan on making any large purchases within the next year and you plan on being in your home for the long term, it may be worth the gamble.

However, help may be on the way. The government recently has had discussions to help people in this situation. Apparently if you are in good standing with your loan, you may be able to refinance at today’s lower rates regardless of the appraisal, but there is not timetable for this and it may never happen.