"If you look at how much can I save in my interest costs and how much will it cost me to do it, and how long will it take me to breakeven and recover those costs? Am I going to be living there that long? And if the answer is yes, it’s going to make sense to refinance," advises Strent.
That's why the Sheren's keep going back to the table. They have gone from a fixed-rate loan to an adjustable rate mortgage on their Virginia home and have also refinanced the loan on a property they own in California. By making some changes to the loan value and term, they have been able to do this at little to no extra cost.
"We did a refinance in California where we actually got negative closing costs," boasts Andrew Sheren, adding, "I think that’s where we did pay half a point."
The trouble of course is that one in five borrowers owe more on their homes than their homes are currently worth. 10.9 million, or 22.7 percent of borrowers were in this negative equity position, or so-called "underwater," position at the end of March, according to a report out this morning from Core Logic, and while negative equity is improving in some of the hardest hit states, it is getting worse in states you might not expect. Nevada still has the highest rate of negative equity, but in New York, borrowers are underwater by the most, an average $129,000.
Being in a negative equity position makes it far tougher to refinance. There are government programs through Fannie Mae, Freddie Mac, and the FHA which offer underwater borrowers a chance to refinance, but there are many qualifications that many borrowers don't meet. Some borrowers are choosing to do cash-in refinances, where they are putting more money into the mortgage, the opposite of what happened during the housing boom. This helps them get a better rate. Unfortunately, the borrower who need to refinance most, likely can't. But for those who can, it can make sense, over and over.
"Nobody gets rich, so far as I know, through refinancing, but what you do do is you save cash flow," says Andrew Sheren.
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