Short Refinance | Short Refi Defined | M3 Strategy Short Pay Refi

A short refinance is the process by which the lender lowers the principal balance on a mortgage loan, allowing the homeowner to qualify for an FHA refinance through a different lender. Achieving a reduced principal is the crucial step in satisfying the loan-to-value terms of the prospective new lender.

Short Refi Borrower Benefits

In essence, a short pay refi creates the opportunity for borrowers to refinance their mortgages with the difference between the principal amount and the debt payoff forgiven. With the loan balance adjusted to correspond with the market value of the property in question, homeowners who qualify for short refinancing can reverse negative equity and make lower monthly mortgage payments under a new loan with more favorable loan terms.

Short Pay Refi Lender Benefits

Lenders are only concerned about the amount due on the loan and the value of the home. In comparison with a short sale, in which the agreement corresponds with the best offer on a home, lenders receive the full market value of a property under a short refinance.

Short Sale Vs. Short Pay Refinancing

A short refi bears similarities with a short sale, in that both permanently establish better loan terms via reducing the principal amount due on the loan. However, whereas a short sale allows for a property sale transaction, short refinancing lets the mortgagee keep the home.

Is a Short Pay Refi Right for You?

If your mortgage is upside down, whether as a consequence of equity loss, financial hardship or an increasing adjustable rate mortgage, a short refi may be the perfect solution for you. Many homeowners in such situations do not qualify for a traditional refinance, which is why short pay refinancing is the best bet.

Given the economic downturn and housing market mess, many have suffered negative equity in their homes and are drowning in mortgage payments. Lenders are all too familiar with the scenario and as a result, are much more open to a short refinancing solution.

Primary candidates for a short refi are those with decent credit profiles who have kept current mortgage payments.

Short Refinancing Process

In order to move forward with a short refinance, your existing lender must provide the seal of approval. You must permit a full financial evaluation, as well as consent to an appraisal. The short refi appraisal consists of a thorough inspection of the property interior and exterior as a means for determining the fair market value of your home.

M3 Strategy builds a case around the terms of your existing loan and locates the best possible lender for a short refi, establishing the terms under which to refinance your home. Upon appraisal and new loan approval, we enter negotiation with the existing lender on your behalf. Once your lender agrees to short pay refinancing, we finalize the new loan transaction, establishing a much healthier mortgage situation.

Sometimes, getting the existing lender to accept a short payoff is as simple as illustrating the difference between the REO value and fair market value of your property. In most cases, however, specialized mortgage debt negotiation strategies are required for successful short pay refinancing.

Short Refi and Your Credit

The manner in which a short payoff is reported to the major credit bureaus depends on the lender, whether settled, paid in full, paid for less, charged-off and so on. Part of M3 Strategy negotiations with the lender is to establish a "paid as agreed" credit filing.

Short Pay Refinancing -- Income Taxes

With a short pay refi, the mortgage debt amount from which you are released does not qualify as personal income. As a result, there are no tax requirements on the forgiven balance of your loan. With the acceptance of a short payoff, the lender exonerates your obligation of the debt, thus releasing you from the parameters of the existing loan.

Let M3 Strategy evaluate your mortgage situation and get you on the road to a healthier loan with a short refinance.