Refinance Mortgage To Avoid Foreclosure

Most people tend to think that a good way to avoid foreclosure is to start over…..refinance the mortgage and just start over.

The problem is most people can't refinance.   

Stopping foreclosure is very complicated.  Unfortunately, you will run into all sorts of mortgage brokers and lenders out there who will tell you what you like to hear and waste your time and ruin your credit even more.  Time is something you couldn’t afford to waste when you are trying to avoid foreclosure.  You only have about 4-8 months after missing your first mortgage payment until you lose your house.  The foreclosure process differs based on state and lender. 

Mortgage brokers and lenders have always preyed on people in trouble.  There is no way they could get you refinanced but they tell you they can help stop foreclosure.  Why would they do that?  They don't get paid if you don't close so why would they take your application and keep you from seeing other alternatives?  The reason is because mortgage brokers are trained to just bring in the business…..get as many loan applications as they could.  Some companies even have sales meetings to enforce getting applications even if they don't close.  This would shock you but mortgage companies live by the rule "throw the whole thing against the wall and see what sticks".  You are in a really scary situation and you're treated like everybody else.  You were never going to "stick" to begin with but now a month or two has gone by and you're even farther behind on the mortgage payments. 

Some mortgage brokers or lenders do actually make money off of you by taking a fee up front.  They understand for a fact no one could refinance your mortgage but they tell you for a fee up front they will begin working on your loan.  Quite a nice business model don't you think?  They tell you everything you want to hear when you are preventing foreclosures.  They gather a fee for the reason that you believe them and they move on to the next unsuspecting person.  Not another minute will be spent on you after they get your money. 

Who could refinance a mortgage to avoid foreclosure? 

You need equity in your home.  Dependent on how far you're in the process, you want no less than 10% to 25% equity in your property.  The farther you are in the method of foreclosure, the more equity you will need.  If you are more than two payments behind and you don't have at least 25% equity, it is nearly impossible to refinance.  Ensure that when you're calculating the equity you factor in all the late fees and legal fees.   

Depending on how far along you are in the foreclosure method, it will make a huge difference when refinancing.  When you are more than 90 days late on your mortgage, everything changes.  The rate will considerably change if you can even refinance at all after that.  This is why it is crucial to choose the right mortgage lender or broker because if they're not experienced in these kinds of loans, they can take too long and you will pass the point of no return. 

Certain private party lenders may be able to refinance you to stop a foreclosure from happening.  These are typically referred as hard money lenders.  They will decide if they will lend you the money personally.  There are no underwriting guidelines.  It is a case by case basis.  These can get very pricey.  The rate and fees will probably be so high you won't be able to afford it. 

This brings us an essential point.  Even though you can refinance, what is your new payment going to be?  If you're having trouble making mortgage payments now, the payment is guaranteed to be more because you're simply trying to avoid foreclosure by refinancing.  Any loan you get will be expensive. 

If you do not have equity in your property then don't even think about refinancing your home to avoid foreclosure.  I hope this article has helped you and you have learned something about stopping a foreclosure.  If anything I hope you have understood that only a few people could help stop foreclosure.  You will end up wasting valuable time and money to find out that no one could help you. 

Good Luck!