Can I Refinance My First and Second Mortgage that is 100 Percent the Value of My Home?

Many borrowers have two mortgages on their residence, a first and a second. Many times, this causes the borrower to have very little equity in his home. One of the important ratios used by lenders to determine a borrower's eligibility for a mortgage refinance is the loan to value ratio (LTV). This ratio is the loan amount divided into the home's value. The closer this ratio is to 100 percent, the harder it is for a borrower to procure a new refinance of the debt. This article looks at the possibility of refinancing a first and second mortgage if the borrower's LTV is at or above 100 percent.

It is Possible

With the Making Home Affordable program instated in mid-2009, borrowers with Fannie Mae and Freddie Mac mortgages have the option to refinance their home mortgage debt with LTVs (loan to values) of up to 125 percent. The Home Affordable Refinance is available through most major mortgage lenders, however, set rules and restrictions must be met. A borrower can contact their mortgage servicer for more information on his ability to refinance his debt through this program.

It is Hard to Qualify

While the programs are in place that allow borrower to refinance up to 100 percent or more of their home's value, strict restrictions have limited the program. For example, the borrower must be current on his mortgage, as well as have all mortgages currently with a Fannie Mae or Freddie Mac lender. This greatly limits the opportunity for a borrower to receive a loan through this program. Additionally, credit scores and other requirements will have to be met as well.

Bottom Line

While it is possible, it is very hard to receive any type of refinance at close to or above 100 percent loan to value. It is in the borrower's best interest, however, to research this possibility and try to lock in a lower interest rate and payment than he is currently paying in order to save money on the debt in the long term. Many times, this type of a refinance can be completed for a nominal fee, which is a large reduction in closing costs compared to the typical mortgage refinance, which costs between 3 and 6 percent of the loan amount.