What Is A Short Refi? AKA – Short Refinance

Have you heard of a short sale? Well, a short refi or short refinance is similar to a short sale in the idea that it pertains to a situation where a homeowner owes more on their mortgage than their home is worth.
As with a short sale, in order to do a short refinance, you will have to get the permission of your current mortgage company (companies – if you have a second mortgage) to do a short refi.
A short refi will typically require your first mortgage company (the company who probably has the biggest mortgage) to forgive or write off some portion of the mortgage balance that you owe them. In some cases this could be a significant chunk of change for your mortgage company to forgive.
Lenders will have to make a determination, just like they do with a short sale, as to what is the best option for them from a business perspective. Can they get more money for your home if they foreclose on it and then offer it for sale, or are they better off letting you refinance a lesser portion than what you owe.
If you are going to the short refi route, be prepared to show your lender why this is a good option for them.