Can I Avoid Foreclosure by Refinancing My Home?

 Posted on May 19, 2021 in Mortgage

There are many reasons why a family may struggle financially, especially since the onset of the COVID-19 pandemic in 2020. If you are having difficulty making mortgage payments, and you do not expect this to change in the near future, you will likely worry about your ability to keep your home. If you default on your mortgage by missing one or more payments, your lender may begin the foreclosure process. Fortunately, you have options, including seeking a new loan to refinance your home. It is best to take action as soon as possible, because once your lender initiates foreclosure proceedings, addressing these issues will become more complicated and costly.

Options for Refinancing

Refinancing differs from other types of loan modifications. When you refinance your home, you will be obtaining a loan that will pay off the balance on your current mortgage. Since this is a completely new loan, you will be required to pay closing costs and fees, and you will need to show that you have a steady income. You will most likely also need to own some equity in your home.

Since you will need to meet a variety of requirements to qualify for a new loan, it is important to begin the refinancing process before defaulting on your current mortgage. Missed payments are reported to credit bureaus, and this will lower your credit score, which will make it less likely that a lender will approve your loan.

Some lenders offer foreclosure bailout loans that are intended to help homeowners pay off any mortgage payments they have missed and become current on their loans. However, these loans often have very high interest rates, and while they may offer a temporary solution, they are likely to place you in an even more difficult position. If you experience financial hardship in the future, you may still face foreclosure, and you will probably not have options for negotiating with the lender of a foreclosure bailout loan.

By refinancing your home instead of pursuing a foreclosure bailout loan, you may be able to secure a new mortgage with a reduced interest rate and lower payments. If you owe more on your mortgage than your home is actually worth, a lender may agree to a short refinance. In these cases, the balance of your mortgage that is more than your home’s value may be forgiven. By creating a new loan with a lower balance, you may have more affordable payments that will ensure that you can continue living in your home.

Contact Our Lake Forest Foreclosure Defense Attorneys

If you are struggling to make your mortgage payments, you will likely feel like you are at a disadvantage when approaching your mortgage lender to request loan modifications or refinancing. In these cases, you need a legal advocate on your side who can help you negotiate favorable terms. At Newland & Newland, LLP, we understand legal issues related to real estate, foreclosure, and home loans, and we will advise you of your best options and help you find solutions to your financial issues. Contact our Libertyville real estate lawyers at 847-549-0000 to arrange a free consultation and get the help you need.

Sources:

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

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