Because of a drop in real estate values, I now owe more than my home is worth. Can I still refinance to a lower interest rate?
If you're in this situation, you want to look toward the government's Making Home Affordable plan, which was announced earlier this year as a way to help borrowers with loans securitized or owned by Fannie Mae or Freddie Mac. At the plan's onset, you were eligible to qualify if you were current on your mortgage payments and your mortgage didn't exceed 105 percent of the current market value of your property.
But in the beginning of July, the Department of Housing and Urban Development (HUD) announced that it were expanding the program to include borrowers who were up to 125 percent underwater.
That means that if your home is worth $240,000, you can owe as much as $300,000 and still qualify. Melanie Roussell, press secretary at HUD, says that because the change hasn't been fully implemented, it's too early to tell how many new borrowers may qualify to refinance. But it's certainly worth a call to your lender.