Re-Mortgaging Your House to Get Through Financially Tough Times

Refinancing without proof of income, known as an undocumented mortgage or an income-advertised loan, is a loan program that does not require mortgage lenders to verify the income of homebuyers or borrowers. Borrowers who can use a no-income/no-assets loan are usually unable or unwilling to provide proof of income to a mortgage lender or broker, such as a buyer of a home whose assets are held in a foreign bank. Commonly referred to as a private home loan, private home loan, or family home loan, this loan is not unlike what you get from a bank, credit union, or other institutional lender. A bridging loan, available from many mortgage lenders and financial institutions, works like a short-term loan and is designed to be repaid when your current home is sold.

A bridging loan allows you to borrow money to put down a down payment on a new home so you can keep buying even if you haven’t sold your current home. A reverse mortgage allows you to convert a portion of your home equity into cash without having to sell your home or pay additional monthly bills. Your first mortgage is the one you use to buy the property, but you can also take out additional home loans if you have the funds.

When you freeze your mortgage rate, you freeze your monthly payment for the next 30 years, provided you don’t refinance or take out a mortgage. You can get a lump sum of cash up front when you take out a mortgage and pay it off over a set period in fixed monthly payments. Private mortgages usually pay off in instalments rather than in a lump sum (unless, of course, you’re selling your home, at which point you’ll have to pay off your private mortgage in full).

Lenders will try to make sure you don’t borrow more than 80% of your home’s value, taking into account your original purchase mortgage and the mortgage you applied for. A 15-year mortgage gives you 15 years to repay the full amount you borrowed to buy a home, while a 30-year mortgage gives you twice as much time to repay the same amount. In general, refinancing works best if you have at least 20% of your home equity (so you can avoid mortgage insurance on the new loan) and can get a new loan at a much lower interest rate than your current loan.

While refinancing to a lower-rate mortgage can save you money each month, be sure to look at the total cost of the loan. Most lenders will require you to take out private mortgage insurance if your down payment is less than 20% of the purchase price of the home. For qualifying mortgages (mortgage loans that meet certain regulations established in 2014 to protect lenders and borrowers), your DTI ratio must be 43% or less.

Hey, even if you didn’t previously completely pay off your property and are looking to re-mortgage, keep in mind that although you need to proceed with caution, the fact that you fall within the scope of people who qualify for this path means you have plenty of safety measures to take heed of as you proceed down this path.