More homeowners suffering mortgages larger than the value of their home can now trade in their mortgage for a more affordable home loan, under a broader Making Home Affordable refinance provision.

Borrower’s current on payments with Fannie Mae or Freddie Mac guaranteed loans could be eligible for refinancing into new loans even if they owe as much as 125 percent of the home's current value.

Previously, the Home Affordable Refinance Program's loan-to-value limit was 105 percent.
It's the latest Obama Administration effort to help more homeowners refinance their mortgage at a lower rate and reduce their monthly payments. A refinance can help owners buck up and keep homes that are worth less than they owe.

Also, if the existing mortgage was written without mortgage insurance, the new loan won't be burdened with the extra cost.

Fannie Mae and Freddie Mac loans typically require mortgage insurance when the loan is more than 80 percent of the home's value.

Of course, if the current mortgage has mortgage insurance and the new loan is 80 percent or more of the home's value, mortgage insurance comes with the deal.

The new 125 percent limit also may not apply if a second mortgage combined with the first exceeds the limit. The new deal also doesn't allow homeowners to take cash out.

The higher loan-to-value ratios are available now to qualified borrowers who apply through their existing servicer. After Oct. 1 a homeowner can shop around and refinance through any Fannie or Freddie lender.

To check your eligibility for a refinance under the new provision, go to: http://makinghomeaffordable.gov/