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I live in Florida and have a 7 year ARM, and I was interested in re-financing to a 30 YR fixed rate. However, my house is now worth $90K LESS than the outstanding principal amount on my mortgage, so of course, my bank will not let me re-finance.

What are my options, if any? Is there a gov’t program or any new law that will let me refinance based on the new value of the house?

7 Responses to “What to do when my home value is less than the principal of my mortgage?”

1. golferwhoworks on June 25th, 2009 7:48 pm

   not if you are current and can pay the note since you are bound by the terms of the note. Your only hope is to have the values come back in time

2. NJ Engineer on June 29th, 2009 12:41 am

   Not a thing. Unfortunately all of the help that the government is giving out only helps those that are already behind but have a potential to catch up with they are offering. I am in a similar situation, though I do have a fixed rate (but want a better rate now) and it’s not as large of a negative value. We’re stuck!

3. Jerrold J on July 1st, 2009 8:44 pm

   YOU bought a hosue and YOU signed the loan docs and now you want a “do-over”???
   There is NEVER a guarentee that things you buy will not go down in price and most things you buy ALWAYS goes down in value but suddenly you think you should be able to make the dollars owed on a home loan dissapper?
   Learn to be an adult and understand that you were GIVEN money based on YOUR promise to repay those funds.
   If the shoe was on the other foot and your home value had gone up $70,000.00 would YOU be willing to have the bank say,” Gee, sorry but we advanced you money on the house and we think you are getting an unfair share of the profit and want you to GIVE us most of your profit.” Would YOU be willing to give them a “do-over”???
   A LEGAL CONTRACT is binding on BOTH parties and why should a bank NEVER get the profit if values go up but ALWAYS acept ALL the loss when values go down?

4. clayjar_azn on July 2nd, 2009 3:34 pm

   You don’t need to refinance now. Values will eventually stabilize.

   Just keep adding principal into your monthly mortgage payments so you can pay it down and reduce your interest. Just wait it out.

5. sdvegas6 on July 5th, 2009 4:42 pm

   well, if you want to try a loss mitigation then you could restructure your mortgage. you do have to fall behind on your mortgage to pull this off and show proof of hardship

6. acermill on July 9th, 2009 1:43 am

   Let’s think here. Did you borrow $90,000 less than you want to repay ?
   I’m guessing not, so who is supposed to swallow that $90,000 ? That would be YOU, and in order to refinance at the current value of your house, you will have to come up with about $90,000 cash to pay down your old mortgage value to one which you can now refinance. That 7 year ARM doesn’t look so pretty now, does it ?

7. lonnie w on July 9th, 2009 1:27 pm

   Your best bet is to wait it out. You are not the only person that this happened too. The government has been throwing around the idea of possiblyl allowing people to have their equity be based upon their original purchase price. Therefore, it may be able to help you and the MILLIONS of other that this has happened too. My husband had an arm adjust and the rate went lower than original because of all the rate cuts going on right now. Worse case scenario you can get a late payment on the loan and try to negotiate a loan modification.

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