Your mortgage is most likely your largest financial responsibility each month, and sometimes it gets hard to make your payment. When you have a hard time making your mortgage payments, you may miss a few months. In some cases, you may want to refinance so that you can take advantage of lower interest rates in the market and get a more affordable payment to work with.
Refinancing for Distressed Homeowners
When you are behind in your mortgage payment, you may not be able to refinance under normal circumstances. Some lenders will be willing to work with you because they offer special programs to help people who are having trouble paying their mortgages. However, most traditional lenders will want to see that you are current on your existing mortgage before they consider giving you a new one. This means that you’ll probably have to shop around a little bit before you can find someone to give you a new loan.
Refinancing for Underwater Mortgages
When property values decline, you may end up owing more than what your home is worth. If this happens, you will find yourself in an underwater position on your mortgage. At that point, it may be impossible for you to refinance with a traditional loan because the lender would not be willing to take on this position of risk. While regular loan programs may not be able to approve you for a refinance, there are some government programs that can help. For example, the Home Affordable Refinance Program or HARP is a government program that helps homeowners who are upside down refinance their loans. In order to qualify for the program, you must have a mortgage that is owned by Fannie Mae or Freddie Mac. At that point, you can refinance, regardless of how much you owe against your house.
If you are behind in your mortgage payments, you may be able to work with a hard money lender or some other type of nontraditional mortgage lender to get help. When using this approach, you have to be careful because the interest rates on the loans will be higher than normal. You may end up paying a lot more for this type of loan, just so you can refinance. This should only be used as a last resort, and as a way to avoid going into foreclosure. Otherwise, it may be better to pursue some other options.
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