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Short Sale vs. HARP Refinance for Underwater Homeowners

If your home is worth less than your loan balance, use this tool to compare the costs of refinancing vs. pursuing a "short sale"

Enter figures in the boxes below and you will then be able to view and adjust the critical factors on the RESULTS page

Current Estimated Property Value

Enter the current value of your home

Current Loan Balance and Proposed Terms of Refinance

Enter your current loan balance

Enter the approximate closing cost factor for refinancing

Total new loan amount will equal

Starting Loan to Value

Enter the proposed interest rate for your refinance

Enter the term (in years) of the new loan

New Principal and Interest Payment will Equal

If you are currently paying for Mortgage Insurance (PMI or MI), enter the cost factor here:

Monthly PMI or MI Factor if applicable

Monthly Mortage Insurance Cost

Selling by Short Sale and then Buying a Comparable Home After Three Years

The Cost of Moving and Renting

Enter the cost of moving. It's up to you to include the time lost changing addresses, setting up utilities, etc.

Enter the monthly cost of renting a truly comparable home in the same neighborhood, school system, etc.

Projected Future Home Purchase Price

The Projected Value of a Comparable Home in 3 Years at an appreciation rate of

Down Payment & Closing Cost Factors for Future Purchase:

Enter the expected down payment percentage for when you purchase again

Down Payment will Equal

Enter the expected closing cost factor

Closing Costs will Equal

Loan Terms for Future Purchase:

Loan to Value and Base loan Amount

Loan to Value =

Loan Amount =

Future Mortgage Interest Rate - you'll be able to adjust this from the results screen

Enter the Loan Term (in years)

Upfront or Single Premium Mortgage Insurance Cost =

Will the Upfront MI or Single Premium be added to the loan amount?

Yes

Loan Amount will equal

Mo. PMI Factor if applicable and resulting monthly cost

Principal and Interest Payment

Cash Requirements for Future Purchase:

Down Payment plus closing costs plus non-financed mortgage insurance

Loan Payments:

Loan Payment for Future Purchase - this includes principal, interest and mortgage insurance if applicable

Loan Payment for Refinance - this includes principal, interest and mortgage insurance if applicable

Monthly Payment Savings of Refinance vs. Short Sale/Future Purchase

RESULTS - On this page you can see the results of the factors used and then further adjust the most important ones

This first graph - displays an after tax cost to own result. This reflects the cost of your mortgage interest expense less tax benefits and

then adds in the negative equity or "underwater" portion of your current home loan on the refi line.

The lower the cost, the better the option:

Refinance Payment =

Purchase Payment =

Difference =

Average Rate of Appreciation

Future Mortgage Interest Rate

Note: Though values have declined over the past several years, this is a rare event and not likely to continue. Over about the last 50 years, the national average is over 5% and this runs from the low 3's at a minimum for some states to over 7% in others.

State lookup list:

Note: Though interest rates have recently seen historical lows, there is no guarantee where they will be tomorrow, much less 3 years from now. As a guide, over about the last 50 years the average 30 Yr.fixed rate is approximately 8.44%. Rates will rise as the economy improves and the Fed's support ends.

Marginal Tax Bracket used to calculate the after tax cost of your interest payments =

This graph - shows the amount of equity that you would have in your home with a refi vs. renting then purchasing another home. Renting will always show a $0 equity position. This graph will also adjust with the appreciation and interest rate controls above.

In this Final Graph - There is one single line that evidences the amount and the duration of any advantage that might be available by selling your home short vs. refinancing. This too will adjust with the controls above. A line that is declining means that over time, any benefit of selling short is also declining. If the line goes under zero, that's the point at which a short sale costs more than staying in your home and refinancing.

WARNING - There are some major negative consequences and risks with selling short - click help icon for MUST READ info