Mortgage Forum

Mike

Hello I am currently working on a loan mododification. However, while working with a loan mod specialist, he also suggested a possible Short-Refinance.

I figured I'd research this also, while I work on the loan mod. Figure this couldn't hurt... right?

Does anyone have any opinion on a loan modification vs. Short-Refinancing? I currently have a possible lender that can help with a Short-Refinance. The only reason I was pursuing this as a possible option was because my loan modification counselor offered it up and said they were likely to waive my early payoff penalty. I was think, why the heck wouldn't I explore this option. I get to refinance my home short of what I owe, and at its current true value.

The lender is working on an FHA loan at 97%. My loan mod counselor said, it was highly possible that they would short refinance the difference of the value down to 97% and waive the early payoff penalty. Of course the down side is the little hit I would take on my credit. At this point, I can throw my pride and credit to the side and take this opportunity to get out of my current situation and come out on top in the long run. I have 2 cars, a few credit cards w/ decent limits not being used, possiblely going down big time in mortgage payments, big price cut on my new loan amount and possiblely a lower rate. I would immediately guarantee myself future equity from the short-refinance and all the money I will save on rate/pmt.

I figured, I"d take a credit hit, but in 7-10 years, everyone will be fine and I will have all that equity back, plus save interest/payment and not to mentioned the equity will start from the lower refinance amount.

Am I being naive or even shady? Or is this a reality that is doable? Please feel free to share your opinion or advice. I haven't given up on my Loan Mod, but I wonder why if this option was available, more folks don't do it. It hurts the credit file just the same?