Can I Refinance My Home to Avoid Foreclosure?

 Posted on October 05, 2022 in Foreclosure

If you are a homeowner who may potentially be at risk of foreclosure, you may be wondering about your options. If you have encountered financial difficulties that have caused you to miss one or more mortgage payments, you may be concerned about your ability to pay what is owed, including any late fees or penalties, while also making ongoing monthly payments in the future. In this situation, refinancing your mortgage may seem like a good idea, since it could potentially lower your monthly payments. However, there are some risks associated with refinancing, and you will want to explore all of your options to determine the best approach to take.

How Refinancing Works

When you refinance your home, you replace your current mortgage with a new one. This new mortgage will have different terms than your old mortgage, and they could include a lower interest rate, a different loan term, or other changes. Depending on the specifics of your new mortgage, this could reduce your monthly payments and make it easier for you to stay current on your loan. For example, if you have a 30-year fixed-rate mortgage with an interest rate of 6 percent, refinancing to a new 30-year fixed-rate mortgage with an interest rate of 5 percent will allow you to save money on interest each month.

In some cases, a mortgage lender may agree to a short refinance. This may be an option if the value of your home has decreased due to changes in the market. In these situations, you may take out a new loan for the actual value of your home, and the lender may be willing to write off a portion of the mortgage loan in order to help you refinance. This will reduce the amount of principal that you owe, and it will likely also result in lower monthly payments.

It is important to remember that when you refinance, you are taking out a new loan. This means that you will need to go through the loan application process again, and you may need to pay closing costs. However, in some cases, these costs can be rolled into your new loan.

The Risks of Refinancing

While refinancing can save you money each month, it is important to understand that there are risks involved. First of all, when you refinance your home, you are taking on a new loan with new terms. This means that if interest rates rise, you could end up paying more each month than you are now. Additionally, if you extend the term of your loan when you refinance, you could end up paying more interest over the life of the loan.

Another risk to consider is the fact that refinancing costs money. In order to refinance your home, you will need to pay for things like appraisals, loan origination fees, and closing costs. These costs can add up, so it is important to make sure that refinancing is the right choice for you before moving forward.

Should You Refinance?

Whether or not refinancing is right for you depends on a number of factors. First, you will need to consider your current financial situation and whether you can afford the monthly payments on a new loan. You will also need to think about your future goals. Are you planning on staying in your home for the long term? If so, then refinancing could be a good option for you. However, if you are planning to sell your home in the next few years, then refinancing may be the best option, since recouping the costs of refinancing through lower monthly payments may take multiple years.

Contact Our San Antonio Foreclosure Defense Lawyer

Refinancing may be an option that will allow you to avoid foreclosure and keep your home. However, it is important to understand the other options that may be available, including negotiating loan modifications or filing for bankruptcy. At the Law Offices of Chance M. McGhee, our Kerrville foreclosure defense attorney can work with you to determine the best steps you can take to avoid the loss of your home. To schedule a free consultation and learn how we can help with your case, contact our office at 210-342-3400.

Sources:

https://www.quickenloans.com/learn/refinance-to-avoid-foreclosure

https://www.lendingtree.com/home/refinance/how-to-refinance-a-defaulted-mortgage/

https://www.investopedia.com/terms/s/short_refinance.asp