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Can we do a "cash-in" refinance?

Q: My husband and I purchased a vacation home 5+ years ago, at the height of the market. We put down a considerable down payment but financed the home with an interest only loan. We would like to refinance to conventional loan, but home is now worth less than what we paid. We are willing to pay down the mortgage in order to improve the loan to ratio value. Can we do this and will lenders be willing to work with us, given our circumstances?

A: Certainly. This is called a cash-in refinance, and is more popular than you might think these days. That said, you may have to come up with a fair bit of cash, depending upon how underwater your home is relative to its mortgage. You'll also need to pay closing costs again, and will also face much more rigorous underwriting standards. You should probably start by checking with the mortgage lender who holds the existing loan to see if they offer any deals for good clients.

More help from HSH.com

  • When refinancing at a higher rate makes sense

    Trade your old mortgage for a new, higher-rate version? There are times when it actually makes sense.
  • Should I pay off a mortgage early?

    By making extra principal payments or refinancing your mortgage, you could pay a lot less interest and free yourself from your mortgage ahead of schedule. Here are the pros and cons of retiring your mortgage early.
  • Are ten-year fixed-rate mortgages (FRM) available anywhere?

    Sure! Virtually all lenders who sell product to Fannie Mae or Freddie Mac will be able to offer you mortgage with a 10-year term. However, interest rates are usually the same as the lender's 15-year offerings.

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