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Refinance Sunday – Will the Obama Refinance Plan Help You?

Posted on | April 12, 2009 | 1 Comment


loan-to-valueAs many of you know, the Making Home Affordable plan is President Obama’s way to help you refinance.  The plan is expected to help home owners refinance at the current historically low rates.  This seems like a great idea in theory, but it is not working out exactly to plan.  The problem that many borrowers are having is the appraisal step.  Part of the Obama Refinance Plan allows borrowers to actually have 105% loan-to-value yet still have the opporunity to refinance.  This means that you may owe 5% more than your home is worth and you can still refinance at a low rate.

Once again, this sounds AWESOME in theory, but it is just not happening.  For those of you that want to refinance, you are probably not aware of the fact that the value of your home has greatly decreased.  If there have been any foreclosures or short sales in your neighborhood, you can expect the value of your home to be as much as 20% less than you expect.  It is hard to swallow this truth, but it will be much easier if you accept it now rather than getting upset after you see your appraisal value in the refinance process.

Unfortunately there is not much you can do unless you have some money laying around.  The best option for you is put a huge chunk of change into your home so your loan-to-value ratio is closer to 70% rather than in the triple digits.  If you hope to refinance with a loan-to-value ratio over 95% you can expect to get a rate MUCH higher than the advertised rates of under 5%.  It is discouraging, but it is the truth.  The only home owners who are going to benefit from the Obama Refinance Plan are those who have been in their homes for many years and have paid off a great deal of their mortgage.

If you are a young home owner, less than five years, it is not likely that your refinance rate will save you that much money.  There is no harm in trying, but it might end up being a waste of time.  If you do want to refinance, make sure to apply to more than one mortgage lender.  You never know what financial situation some of these companies are in and some of them may be desperate enough to give you the deal of a lifetime.

Make sure to check in with Subprime Blogger every Sunday as I post my weekly Refinance article.  Bookmark the link below to access the content easier.

Category: Refinance, Refinance Sunday
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Comments

One Response to “Refinance Sunday – Will the Obama Refinance Plan Help You?”

  1. Imee
    April 13th, 2009 @ 3:40 am

    Obama’s Making Home Affordable can help a lot of homeowners save their houses from the doom of foreclosure. However, it’s not for everyone… So other loan modification/anti-foreclosure methods must also be considered.

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