Stop Mortgage Foreclosure through Refinancing
For many homeowners hoping to stop foreclosure, mortgage refinancing may be the most attractive option. Unfortunately, not every homeowner who has fallen behind on mortgage payments and is facing foreclosure will be able to refinance. For those who are eligible for refinancing, however, a new home loan can stop foreclosure and possibly provide additional benefits as well.
For instance, home refinancing may mean lower interest rates, lower payments, a change in the repayment period, or any number of other potentially favorable changes in terms. In some cases, refinancing even provides additional cash to catch up other bills or make improvements to the home.
Starting fresh with a new loan is very appealing to many homeowners, who want to stop foreclosure and keep their homes but hope to avoid more drastic options like Chapter 13 bankruptcy. Paying off other bills through refinancing may lower monthly expenses by consolidating payments, and the new loan will provide an opportunity to build a more positive credit history after past-due mortgage payments have taken their toll.
Why Doesn't Everyone Just Refinance?
Refinancing sounds like a great option, and it can be for homeowners who have sufficient equity. The problem for many homeowners who find themselves facing foreclosure is that they have little or no equity in their homes. This is especially true for homeowners who have adjustable rate mortgages (ARMs) or interest-only loans. These subprime loans are often extended to people whose credit might prevent them from qualifying for more traditional mortgage loans on more favorable terms. While the theory advanced by these mortgage lenders is that subprime alternatives open up the possibility of home ownership to people who would not otherwise be able to finance homes, more and more homeowners with subprime mortgages have found themselves facing foreclosure over the past few years.
These homeowners have an especially difficult time when trying to stop foreclosure because the interest-only payments or lower initial payments in an adjustable rate plan have allowed them to accumulate little or no equity in the property. Generally speaking, it can be difficult to refinance if your equity in your home is less than 15% of the value of the home, especially with the credit problems that many people facing foreclosure have. In some cases, 25% equity may be required.
For example, if your home is currently valued at $200,000, you may have difficulty arranging to refinance to stop foreclosure if you owe more than $170,000. Refinancing becomes particularly problematic when your mortgage is more than 90 days past due, and then even greater equity may be required.
However, for homeowners who have more than 15% equity and whose mortgages are less than 90 days past due, refinancing is often an excellent way to stop foreclosure and regain financial control. Refinancing may, among other possible benefits:
- Stop foreclosure
- Roll in past-due mortgage payments and fees
- Lower mortgage interest rate
- Lower monthly mortgage payments
- Pay off higher-interest bills like credit cards
- Lower overall monthly payments by consolidating debts
- Improve credit by paying off delinquent accounts
How Does Refinancing Work?
The home refinancing process is simple, and very much like applying for your first mortgage. Once you've been approved for a refinancing loan, the new lender will pay off the old mortgage loan, including any outstanding late charges or fees. You'll start with a clean slate, just as if you had just purchased your home.
To get the process started, or just to learn more about the option of refinancing your home, fill out the form on this page and a refinancing professional will contact you to discuss your options and how you may be able to use mortgage refinancing to stop foreclosure.
If you're behind on your mortgage payments or already facing foreclosure, don't delay! The foreclosure process will keep moving forward, whether you take action or not. Learn about your options today, while you still have time to take action to stop foreclosure and save your home.