Refinance To Prevent Foreclosure Of Your Home

Refinance To Prevent Foreclosure Of Your Home

Just a few short years ago, many homeowners accepted adjustable rate mortgages (ARM’s) when interest rates were low and found their payments to be well within their means. However, recent economic changes have caused financial institutions to re-access the interest rates they were charging. In some cases, home mortgage lenders offered mortgages at rates which were even less than the prime interest rate and these mortgages have been adjusted, leaving the homeowners with soaring mortgage payments they simply can’t afford to pay. It all sounded great at first, but now things may have caught up with you, placing you in very real danger of losing your home and your credit rating.

Financial problems, job layoffs, medical problems and every imaginable type of financial disaster can make a homeowner think they have run out of options. If this sounds like you, the first step you should take is to research the possibility of refinancing your home to reduce your home loan payments. If you can get a lower interest rate, you might be able to significantly reduce each payment on your mortgage loan. Just two or three percentage points, often called “points”, can reduce your payments and may bring the amount into your budget.

How do you determine if refinancing will help you find the foreclosure help you need? First, call your mortgage lender to determine the current interest rate you’re paying. Also, ask exactly how much is needed to payoff your mortgage in full. The answer to these two questions are key in learning whether refinancing will help you avoid foreclosure or not. Next do some research with a free mortgage loan calculator.

While these calculators are meant to provide only a rough estimate of what your home loan payments might be after refinancing, you should be able to get a good idea whether or not you can save hundreds of dollars per month. If you do find you can obtain significant potential savings this way, then you’ll need to consider refinancing closing costs. Every mortgage loan involves closing costs for performing a title search, survey, and other inspections to ensure the sale of the property is completely legal and binding. It’s usually not as costly as the closing costs involved with your original home loan but your mortgage lender can provide you with a rough estimate of how much closing costs will be when you refinance.

Mortgage closing costs will apply to any mortgage loan you get… including a “Refi”. This cost can be negligible compared to the reduction in payments if your original home loan was established at a high interest rate. After all, a large part of each mortgage payment in the early years of a mortgage is applied toward interest rather than principle. So if you can reduce your interest rate by several percentage points, you can probably save a great deal of money over the life of the loan even though you’ll have to pay closing costs on the refinanced mortgage.

Foreclosure help can be obtained through credit counselors or your own research. If at all possible, you must prevent foreclosure on your home. There are many situations where refinancing can help you from losing your home and the money paid into the equity of your home. If you think you might be near the point of losing your home to foreclosure, seek advice from a qualified credit counselor or research online to learn if you can refinance and avoid this financial tragedy. A foreclosure remains on your credit report for years and can really hurt your credit score when trying to purchase anything on credit in the future, including another home.

If you’re financially sound and are learning how to buy foreclosures, you’ll want to understand the process of refinancing. If you buy a home which is in the process of foreclosure because someone else defaulted on their home mortgage loan, you’ll have to obtain financing so that you can pay for the house, whether you intend to live in it or rent it as an investment property. This process is not unlike refinancing because refinancing really just establishes a new home loan.

If you’re thinking of refinancing your mortgage in order to access some of the equity you’ve built up in your home through years, you should consider carefully. If you already have a home loan which carries a low interest rate, you should not consider refinancing unless it’s absolutely necessary to pull cash from your equity and you’ve already pursued all other possible options. There are many other types of loans for which you might qualify without taking out the equity you’ve worked so hard to build up. If possible, try getting a signature loan, student loan, construction loan or any other loan vehicle instead of refinancing.