A short refinance is the refinancing of a mortgage by a lender for a borrower currently in default on his or her payments. This is done to avoid foreclosure. Foreclosure is an expensive solution for a lender for loans in default. Typically, the new loan amount is less than the existing outstanding loan amount and the lender typically forgives the difference. A lender might do this because it is more cost effective than foreclosure proceedings . A short refinance is also known as a short payoff.
Instead of the property being foreclosed and/or sold, it is refinanced with a new lender. The short refinance allows the homeowner to retain ownership of the property , while at the same time avoiding a foreclosure or possible bankruptcy .
If you want to keep your home, but don't have enough equity to get into a foreclosure bailout loan, a short refinance is your answer. By negotiating a short refinance with your current lender, you can obtain a payoff of less than the full amount owed, and refinance your home with a new lender.
A Short Refinance helps homeowners that do not have sufficient equity to refinance through normal channels. This type of refinance is most commonly used for borrowers experiencing a financial hardship. The most common financial hardships are:
Reduced income.
An adjustable rate mortgage that has an increase in payment beyond the borrower's ability to pay.
Circumstances beyond the borrower's control such a family illness or personal injury.
