Refinancing after a mortgage modification is something we get asked about quite frequently. Those that have had a modification to their mortgage have usually done so because they’ve proven to the lender they’ve gone through a financial hardship and can no longer make the monthly mortgage payment but still want to keep the home. Lenders usually don’t approve modifications unless you have a good chance of repaying the debt under modified terms. Sometimes that modified term could be a refinance permanently or a short-term refinance or modification to the monthly mortgage payment until you can get back on your feet and maintain the monthly mortgage payment as it was before.
If you had a recent monthly mortgage modification you may want to completely refinance as long as the situations and finances have changed for the better. Many banks offer loan modifications to homeowners who wouldn’t otherwise refinance because of their equity position or income. Many homeowners have gone through the Home Affordable Modification Program or HAMP but now want to refinance into a permanently lower interest rate and payment, possible with a HARP.
In order to qualify for a refinance after a mortgage modification, you must have made at least 24 monthly mortgage payments since the modification was completed. Even if there was an additional second mortgage in place that was restructured the same waiting time applies. This also goes for a primary residence, second home or rental property. If you’re purchasing or refinancing a different property independent of the property that has the modification a one-year waiting time applies.
If the modification contained a forbearance, meeting a specific time. That you did not make any mortgage payments and additional interest was tacked onto the principal balance it will be up to the individual mortgage company to approve a refinance. If you want to go with a new company for the refinance you must have met the 24-month or 12-month requirement.
Refinancing is not impossible but qualifications are the same as if you are getting a brand-new loan. You have to have income requirements, your credit must be in good standing and you must have eligible job history. If your financial situation has improved and you have maintained a stable income for two years, have enough income to cover the new mortgage payment, have decent credit and paid all your bills on time, there’s a very good chance a refinance might be ideal. It is a good way to wipe the slate clean on any mortgage modification and start over with a new interest rate and new home loan. You can also build in any additional debt such as car payments or student loans, second mortgages or loans into the new mortgage payment if allowable.
It is possible to get a refinance after mortgage modification but there are requirements. If you’re looking at a refinance after recent mortgage modification please contact me today. I’d be happy to run some numbers for you and find out if you are eligible for a refinance at this time.
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