Refinance Your Mortgage without Losing Your Mind

by AJ in Saratoga, Bill in Spring Grove, Jason in Pasadena, and Noel in Crest Hill

Ask Kate how to refinance your mortgage without losing your mind: I'm trying to restrain myself. The banks' self-righteous superiority complex really irks me. It's not easy to hold back on my rant because the banks are responsible for putting many homeowners in the position they find themselves in today. Meet AJ, Bill, Jason, and Noel.


AJ can't refinance with solid credit and plenty of equity because he had a short sale more than 2 years ago. Bill can't refinance his mortgage that's about to balloon in spite of his perfect 30 year payment history. Because Jason's mortgage isn't backed by Fannie, he has zero options for refinancing. Noel put down 20% but can't refinance after (barely) missing the HARP deadline.

Trying to Refinance a Mortgage after Short Sale

By Al from Saratoga, NY
Refinance Your Mortgage without Losing Your Mind

Hi Kate,

We are trying to refinance our mortgage after having a short sale on another home 2 1/2 years ago. We have never had any other trouble and are completely current on the existing loan that is a 30 mortgage at 5 1/2%.

We would love to try to take advantage of the current rates but have already been turned down by a few banks even though our credit scores are greater than 750 and our LTV is about 70%.

Any suggestions would be appreciated. Thanks, AJ

***zz-portrait-left.shtml*** Ask Kate answers: Trying to Refinance a Mortgage after Short Sale

Hi AJ,

When a homeowner's mortgage balance is greater than the sales price, it's called a short sale. Lenders claim short sales are one step away from a foreclosure.

So the long and the short of it is (pardon the pun), when you sell a property for less than it's worth, lenders turn punitive and report the short sales to the credit bureaus. And borrowers are stuck waiting it out, until their credit scores inch their way back up.

But even when credit scores improve, the short sale blurb that remains on a credit report has a way of continuing to make lenders skittish.

So call a few lenders for their policies regarding refinancing after a short sale and to compare their mortgage rates and refinance fees.

Then you can decide whether to wait it out, hope the rates stay low until you can get new financing, or proceed with contacting your loan servicer for a HAMP tier 2 mortgage modification.

Best wishes,


Bank Refuses to Refinance Balloon Loan - Perfect Payment Record and 800 Credit Rating

By Bill from Spring Grove, Illinois

Hi Kate:

Why does my bank refuse to refinance balloon loan when I have perfect payment record and 800 credit rating? I have a $173,000 mortgage on a second home. (My wife lives there and we are separated.) It is ballooning at the end of the month.

My home has a $200,000 interest-only mortgage at 6.5%. I am paying $1083 for mine and $810 for hers. But I have just about exhausted my savings. I get $1540 and she gets $530 from social security. She also gets income on a rental property of $1300 a month.

Between the RE taxes and the high interest, our income isn't making it. I have been trying to get refinanced at a low interest-only rate for each house until I can sort out, sell or downsize somehow. Why does the bank not do interest-only loans any more.

I have been with Harris bank for 30 years with a perfect payment record. They don't want to make loans on property that is for sale, but they won't refinance either. I need some short term cheap money, and both homes are not underwater.

***zz-portrait-left.shtml*** Ask Kate answers: Bank Refuses to Refinance Balloon Loan - Perfect Payment Record and 800 Credit Rating

Hi Bill,

A balloon mortgage does not fully amortize (pay off) over the life of the loan. That leaves the homeowner owing a significant balance if they can't refinance or pay off the remainder of the mortgage.

I definitely recommend asking your loan servicer about a HAMP loan modification before the balloon date rolls around. The terms may not be exactly what you are hoping for but I'd venture to say, modifying your mortgage would be better than losing the home.

You might also want to read my answer to Tina from Coatesville, PA at Caught in a Balloon Payment.

You also asked why banks aren't offering interest-only terms. Simply put, this was a category of loans with a high default rate a few years ago. So there's little appetite among investors today for the product.

Best wishes,


Underwater Refinance without FHA or HARP 1 and 2

By Jason from Pasadena, CA

Hi Kate:

I owe about $216,000 on a property that is worth about $190,000. The loan is not FHA and isn't backed by Fannie or Freddie. So I have found exactly zero options to refinance. I currently have renters in the home as well. Tried to get Wells Fargo to work with me 2 to 3 times, with no luck.

Am I just stuck unless or until prices increase to give me 10% equity?

***zz-portrait-left.shtml*** Ask Kate answers: Underwater Refinance without FHA or HARP 1 and 2

Hi Jason,

The situation for homeowners who can't refinance because their mortgages are not backed by Fannie Mae or Freddie Mac is absurd. I want to know which homeowner said, Hey, above all else, make sure I get a Fannie or Freddie (GSE) mortgage.

Yet the way the government excludes those without GSE financing from the HARP program, you'd think homeowners had been responsible for picking the investor. Sadly, many borrowers are held hostage by the investor their lenders chose, to the extent that it threatens their homeownership status.

Read the HARP 3 proposal and then contact Washington DC and your state politicians to say you will not be voting for them again if they don't get off their duffs, stop the proposals already, and truly implement a refinance program that will meet the needs of the majority of US homeowners!

Best wishes,


Put Down 20% Yet Can't Refinance

By Noel from Crest Hill, IL

Hi Kate:

I have been inquiring on refinancing my home. I have tried even with Bank of America who is my current mortgage holder.

I bought the home in 2009 for $106,000 and is now currently appraised at $90,000. I put down 20% of the home value. I have been current with all my payments. I do have some minor credit cards and 2 cars. The reason I keep on getting turned down is because I don't make enough money to what I have going out.

Is there anything you can recommend? Please advise. Thank you, Noel

***zz-portrait-left.shtml*** Ask Kate answers: Put Down 20% Yet Can't Refinance

Hi Noel,

It's frustrating when you realize a refinance could make your mortgage payment become affordable but your lender's tunnel vision keeps them from considering your request.

If you have exhausted your refinancing options (try other lenders too), I suggest asking your loan servicer to modify the terms of your current home loan. Read HAMP Mortgage Modification Strategies first and then call your loan servicer to see what they will offer you.

Best wishes,



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