Positive Equity Makes It Possible to Refinance

By: | January 22nd, 2013

Refinancing a mortgage is simply replacing an existing mortgage for a better mortgage. In some cases, a refinance is chosen in order to take available equity as a cash out refinance which has been rare as home values decreased in recent years. For many homeowners, the loss of equity has made it impossible for obtaining a refinance, unless the mortgage meets the eligibility criteria for special government loans programs, such as HARP and the FHA streamline. As the housing market has shown improvement and is gaining momentum, positive equity is now making it possible for more homeowners to refinance.

According to CoreLogic, a data and analytics company, 100,000 additional borrowers reached a state of positive equity during the third quarter of 2012. During the second quarter of 2012, more than 1.3 million borrowers moved into positive equity. The total number of borrowers who moved from negative to positive equity as of the end of September 2012 was 1.4 million.

Once a borrower is no longer underwater (negative equity), a traditional refinance can be obtained. The move to positive equity is good news for homeowners who do not have loans that were sold to Fannie Mae or Freddie Mac which are traditional conventional loans. Many homeowners have mortgages that are held by other investors which has made it difficult to refinance. With good credit, qualifications and the move to positive equity, these homeowners can possibly refinance through traditional channels such as conforming mortgages.

Mortgage rates remain at historic lows at this time, but there is no way of knowing which way they will move. For homeowners who are now holding loans with positive equity, it is likely a good time to refinance. Since a traditional refinance will require the same information and documentation as a regular conforming purchase loan, it is time to gather that information together to be prepared in advance. Shopping around for a refinance is also a good idea since lender rates and guidelines can differ. Homeowners can start their search by submitting the online form which does not require a social security number, but will return a response almost instantly. surveys more than two dozen wholesale and direct lenders’ rate sheets to determine the most accurate mortgage rates available to well qualified consumers at about a 1 point origination fee.


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"I was looking at a 4.375% with Wells Fargo, my local bank, before stumbling upon via a google search. They hooked me up with a longstanding savings and loan bank of which I closed on a 30 year fixed rate of 3.75% with. I'd recommend anybody looking at refinancing or buying a home give free rate a shot."

-Joe Klien, Detroit, MI