Refinancing a Condo

Refinancing a condo can mean a lower interest rate.
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If you purchased a condo before the housing crash of 2008, you may consider refinancing the mortgage to take advantage of a lower interest rate. Condo owners tend to have more difficulty refinancing than owners of single-family homes, though. Some condo owners were previously unable to refinance because the value of their home fell so much, but rules in place since 2011 make refinancing possible for more condo owners.


You may have seen incredibly low mortgage interest rates offered, suggesting to you that refinancing is the best option. Rates vary from homeowner to homeowner, though. According to Michele Lerner of Fox Business News, people who own condominiums usually face higher interest rates than owners of houses when they refinance, as condos are considered more risky investments than single-family homes. The higher risk typically translates to a rate that is about 0.25 of a percentage point higher than the best rate for a single-family house. Your credit score, amount of equity you have and the length of the mortgage also impact the rate you get.

Length of the Mortgage

One reason to refinance is to adjust the terms of the mortgage. You may have a 30-year mortgage, for example, that you want to reduce to a 15-year mortgage. You will pay less interest on a shorter mortgage over the entire term of the mortgage, but your monthly payment is usually higher with a 15-year mortgage compared to a 30-year mortgage. Alternatively, you have the option of refinancing a shorter term mortgage to a 30-year loan. If you struggle to make the monthly payments, this may be the option for you, because the longer term means lower monthly payments.

Home Affordable Refinance Program

Previously, condo owners who owed more than the value of the condo on their mortgage were unable to refinance. The Home Affordable Refinance Program, or HARP, has changed that. At time of publication, HARP is scheduled to last through December 2013. HARP eliminates the value cap on mortgages, meaning you can owe far more than the house is currently worth on the mortgage and still refinance to get yourself out from under. HARP has several requirements you must meet, however. For example, your mortgage must be owned or guaranteed by either Freddie Mac or Fannie Mae.

Other Obstacles

Condo owners face several other obstacles when it comes to refinancing that single family home owners do not. To qualify for a loan from the FHA or Fannie Mae, the condo needs to be part of an approved building. Lenders may also look at the behavior of other condo owners in the complex when making a decision. If your neighbors have not paid their dues or if the condo building itself does not have much in the way of cash reserves, you may have trouble refinancing.

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