How does a "Short Refi" affect your credit? No lates, just home value dropped well below principal balance on my original loan. Would the reset principal balance be worth the credit score hit?
A short refi is going to hurt your credit. The amount is still unclear as there is no foreclosure like a short sale but you also are not paying "as agreed". The lenders have not come out and said how they will treat a "short refi" as opposed to a short sale or foreclosure in regards to credit history.
I have to say that it should not make a difference in your decision. Why should it not factor into your decision?
Because you need to make the right LONG TERM choices for yourself and your family.
The questions you should be asking are:
How much can my balance be reduced?
What interest rate will I now have and for how long?
If the reduction is sucessful does this actually resolve my situation or do I still have a problem anyway??
If I still have a problem anyway, what is that problem and what can be done to resolve it?
There will be benefit if you answer these questions honestly for yourself; as they should lead you in the right direction for yourself and your family.