How to Refinance if you Owe More than Your House Is Worth

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Both Fannie Mae and Freddie Mac have announced programs to provide refinancing to homeowners who owe more than their home is worth.

The newest program allows you to refinance up to 125% of the current value of your home. For example, if your home is worth $200,000 and you owe $250,000 (125% of $200,000), you could possibly refinance your current balance at a lower rate.

Your loan has to be owned by Fannie or Freddie. You can call your existing lender and ask them if your loan is owned by one of those two agencies. Your credit report should also indicate who owns your loan. If you owe less than $417,000 on your home, there is a good chance your loan is owned by Fannie Mae or Freddie Mac.

If you are paying more than 6% on your loan, this could be a good opportunity to lower your rate and payment. Most mortgage lenders who are Fannie Mae or Freddie Mac approved can handle the refinance. You do not have to go through your existing lender.