It's a concern we've all had at one time or another in our adult life: what will happen to my home if I don't have enough to make payments? A lot of people automatically assume they will have to go through a short sale or worse, foreclose on their home, which can be equally painful emotionally and for a person's credit score.
But are short sales and foreclosures the only remedies for home owners who are struggling to make payments on their mortgage? The answer is no. Refinancing could be another solution. Let's take a look.
What is refinancing?
When you refinance your mortgage, your bank essentially allows you to pay off one loan in exchange for a new loan that may offer you lower payments, a lower interest rate or the ability to pay off your mortgage sooner.
With interest rates sitting at record lows, some financial experts are saying that now is a good time for struggling home owners to make their debt burden more manageable by refinancing their homes. But is this really the best option for everyone? The answer is no here as well.
When to refinance your home (or not)
There are a lot of things to consider before you refinance your home, including but not limited to:
- The current state of your bank accounts
- Your savings history
- Your credit history
- Your current employment situation
- The state of your credit card debt
All of these things, including a variety of other financial indicators can actually look bad to lenders who may not want to refinance your loan if you have too many red flags. On the other hand, a bank may approve a refinance, such as a move from a fixed-rate mortgage to an adjustable-rate mortgage, which may not always work out how the home owner wanted.
Where does that leave me?
Though you may feel compelled to speak with a banker about the decision to refinance, in-debt home owners may find it more beneficial to speak to an attorney with considerable experience in real estate matters related to debt.
Securing a loan modification that makes sense for you and your family may not be clear to you, but it will be to an experienced attorney. In the end, after reviewing your case, you may come to learn that you need another debt relief option, possibly even one that will allow you to keep your home as well.