Last Updated 5th April, 2014
Q: I have a question from a reader who wants to know about getting a lower rate on her mortgage. She said, “I bought my house in 2007 and I now owe more than my house is worth. But I want to get a lower interest rate than the one I have right now. I can’t use the company that I’m paying my mortgage to because they’re just a mortgage broker. They now own my mortgage. I would like to get a lower interest rate though. How can I do it?”
A: Well, I hate to tell you this but you probably won’t be able to take advantage of these historically low interest rates that we are getting right now, that we’re seeing right now. Of course, recently, according to Freddie Mac and Fannie Mae, 30-year fixed rate mortgages have dropped to their lowest levels in decades. We’re talking about 4.35% or so. That’s amazing for anybody who wants
to refinance their loan or do an initial home purchase.
The problem for you though, is that you said your house is under water. That you owe more than the house is actually worth. Think about the lender’s risk here. If you’re saying that you owe $300,000 on your mortgage, and I’m just making up a number here. But the house is only worth $250,000, why would a lender extend to you a new 30-year loan after you just got it three years ago, extend your payments again over time and give you fresh money for something that’s not worth that amount? They simply won’t do it. Your best bet is to look into one of the federal government programs that the Obama Administration has launched in order to help homeowners who are struggling with their payments, who are under water, who have recently lost their jobs, or who are otherwise finding their homes unaffordable. Check out the Making Home Affordable Program for more information.