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Mortgage Refinance Avoid Foreclosure

If your house is in danger of foreclosure, don’t despair. There are things you can do to prevent it. Maybe you have an adjustable rate mortgage (ARM) that is now spiraling out of control. Many Americans are in your shoes, and it is not too late to save your credit and your home.

Refinancing is the best option if you can qualify. You will want to switch to a fixed interest rate loan that is close to the same adjustable interest rate you are paying now. Only with the fixed, the interest rate will stay the same for the entire life of the loan and you will be able to sleep at night since you won’t have to lose sleep anymore over skyrocketing interest rates.

One of the hurdles to refinancing for you might be a prepayment penalty that you owe to your current mortgage. This prepayment penalty could cost you thousands of dollars. However, if it is between that and losing your house to foreclosure, it is probably worth just paying the penalty.

Another problem could be the current housing slump in the housing market. In some places, the values of the homes have fallen below their purchasing price. That means that you may be paying off the mortgage on a house that is no longer worth the price of your loan. This makes getting the credit for another mortgage for refinancing much more difficult, as lenders are tightening their lending practices.

It isn’t impossible to get a mortgage, but lenders now want to see higher credit scores, proof of income, and in some cases a down payment.

But if you are in the market for a mortgage refinance in order to avoid foreclosure, one thing that is working in your favor is that the lenders usually want to avoid foreclosure as much as you do. They lose money on foreclosures as well, because they have to turn around and sell your house for usually less than it’s worth. Because of this, some banks are letting people switch out of their adjustable rate mortgages into fixed ones for no extra cost or fees.

Contact your lender or mortgage company to see if such an option is available for you. If you are absolutely unable to refinance, another option may be certain types of bankruptcy. It will ruin your credit, but you will be able to keep your home and it may be preferable to foreclosure. But make sure you exhaust all of your refinance options first, because refinancing to avoid foreclosure is definitely your best option.

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