Selling or Refinancing with Low Equity
When the housing crisis hit a few years ago, many people were left with homes that had little to no equity. While today the market is on the upswing, many homeowners are still dealing with this issue of low equity. It can be tempting to run if you owe more than the home is worth but you should know that you will pay 6-10 percent in fees and commissions. If you don’t have enough equity you could still owe the bank money. Here are a few tips to help you navigate the business of selling or refinancing with low equity.
Talk to Your Lender
Your bank may have refinancing programs that can help you make your payments more affordable; it doesn’t hurt to sit down with your lender and discuss your options. The bank will then look at your LTV (loan-to-value) ratio: if it’s above 80% you’ll have to pay for the added expense of mortgage insurance. One option is to refinance into two loans, a first mortgage and a line of credit; this is a great option if the two loans are lower than what you were already paying.
Give Your Budget an Adjustment
Your income and your expenses are the two sides to your budget. One option is to tighten up your budget and reduce your expenses. This way you’ll be able to put more money aside for your mortgage. If you are able to pay more than what is due each month it may lower your LTV enough that you won’t owe anything at closing.
Hold On
Home prices will continue to improve as the housing market and the economy recover; this is great news for you. This will mean that if you are able to hold on a little longer you might not have to sell. If you choose this option prepare to be patient.
Be a Landlord
Consider becoming a landlord if you have to move out of your home, as this will at least allow you to break even. Or if you aren’t moving out consider renting out a room in your home to supplement your income while you work to save more money.
Research Government Programs
There are a number of government assistance programs that can help you to get things back in working order and reduce what you owe. Remember that each one is different, with different qualifications and criteria so you’ll have to be diligent in your research. If you qualify for any such program act quickly to take advantage; don’t procrastinate or you could miss your opportunity to refinance your home.
One of your biggest assets when it comes to financing and low equity issues is to work with your lender or speak with a qualified mortgage professional to help you determine what you options are. If you are facing low equity and the possibility of selling your home, don’t lose hope; there are options available to you. Do your research and determine the best route for you and your family.