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How Can I Refinance My Mortgage With Negative Equity?


Home prices in many parts of the country fell sharply after the housing bubble burst. Many people were left with underwater loans as a result – meaning a home is worth less than the loan balance. This is also called negative equity.

This makes it difficult for you to refinance into a lower mortgage loan rate, since banks do not grant loans for more than a property’s value. It also makes it harder to sell the home since you’ll need to pay off the loan when you do.

Current low mortgage rates would allow to save a lot each month if you can rework your loan. Trimming payments would allow you to pay off your loan sooner or just avoid falling behind.

To provide assistance, the Department of the Treasury and Department of Housing and Urban Development created many programs to help underwater homeowners. One such plan is the Home Affordable Refinance Program (HARP). If you are in danger of falling back on your payments and are unable to refinance, HARP may be your answer for some relief.

However, in order to use HARP you must meet some criteria, including:

  • Fannie Mae or Freddie Mac must currently back your loan
  • The mortgage must have been bought by one of the mortgage giants before May 31, 2009
  • The mortgage cannot have been refinanced under HARP before. The only exception would be if it was backed by Fannie Mae and was refinanced between March and May of 2009
  • Your current loan-to-value ratio must be 80 percent or more
  • Your must be current on the loan at the time, and must have shown a good payment history for the past 12 months

To find a loan-to-value ratio, you can just divide the amount you owe on your mortgage by the amount the house is worth. For example, if you bought a home in 2006 for $150,000, but it is now worth $100,000 and you still owe $120,000 on your loan, the LTV ratio would be 120 percent.

In order to start a HARP loan, you must take 3 steps:

  • Find out whether the home loan is owned or backed by Fannie Mae or Freddie Mac
  • Contact the current servicer of the loan to talk about HARP. However, it is also an option to contact an approved servicer to ask for more information.
  • Compare rates and costs to ensure you get the best rates possible

Contacting a HARP lender could make a loan much more affordable, and can stop mortgage default and foreclosure. HARP will end on December 31, 2013 unless extended by the government.



My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.


  1. The font is too small I couldn’t read the post.

  2. I wish I would qualify for one of these programs. My current loan isn’t held by Fannie or Freddie and I the development I live in isn’t approved for FHA loans.

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