CONSUMER ALERT–REFINANCING CAN BE A MISTAKE!!

Homeowners should be aware of the fact that there can be a danger to refinancing your home if your existing loan is a "purchase money" loan.

Here is the deal. California is a non recourse state. That means that if a homeowner runs into financial difficulty and can not keep up with their mortgage payments, they are better off dealing with their lender(s) if the loan(s) are purchase money loans. A purchase money loan is one which was obtained strictly for the purchase of a property. If that home owner ends up in a short sale situation (trying to sell the property for less than they owe the bank) their chances of having the outstanding balance on their loan(s) forgiven is covered by California statute.

If, however, they end up in a short sale situation after they have refinanced their loans, the lending institutions have legal recourse to come after them for the unpaid balance of their loan. They can loose their home and still owe the bank thousands of dollars.

It would be a prudent move to check out the impact of a refinance if the probability of delinquency and/or a short sale in the future. Refinancing to lower loan payments may be a good move but everything has to be weighed carefully before making that move.

At this writing thousands of adjustable rate loans are about to adjust, increasing the loan payments significantly. Borrowers facing this reality should have all of the facts before they refinance.

The California Association of Realtors are vocally supporting SB 1178 to extend anti-deficiency protections to homeowners who have refinanced "purchase money" loans and are now facing foreclosure.

All of this is very confusing for most borrowers. Feel free to call and ask questions. If we do not have the answers we will point you in the direction of a reputable organization that can.

CONSUMER ALERTREFINANCING CAN BE A MISTAKE!!

By: liamkgardner

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