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Avoid Financial Distress with Mortgage Refinancing

If you are experiencing significant financial distress, bankruptcy needn't be your only option. Now that interest rates have plummeted to a record low, mortgage refinancing is a viable tool for homeowners in need of digging themselves out of debt. In fact, mortgage refinancing allows you to keep your property and pay off your debts—giving you the financial flexibility you need to plan for your financial future.

When you refinance your home mortgage, you exchange your home loan for a lower interest loan. In many cases, homeowners are able to switch out their Adjustable-Rate Mortgage (ARM) loans for more affordable Fixed-Rate Mortgages (FRMs). Depending on your financial goals—whether you want to obtain extra cash to pay bills, lower your monthly payments, or receive a lower interest rate—mortgage refinancing is a bankruptcy alternative that can provide the following benefits:

Tap the Equity in Your Home
If you're like most homeowners, your home is the most valuable asset you own. The equity in your home can be tapped to finance large expenses (like home improvements or college tuition) or can be used when you are in financial need. Many homeowners who are having difficulty making ends meet choose cash-out refinancing which allows them to refi their home loan for more than it's worth and pocket the difference. While you receive extra cash during a cash-out refinance, you essentially reset your mortgage and take on more debt. Given the fact that a cash-out refinance does come with a price (refinance fees, equity loss, and more interest), you should speak with a qualified attorney about whether this method of refinancing is the best way for you to avoid significant financial distress.

Obtain a Lower Monthly Payment
By refinancing your mortgage when interest rates are lower, you may be able to swap your higher interest rate for a more reasonable mortgage rate, thereby lowering your monthly payment. Since the money that you save on your mortgage payment can be put towards repaying your other debts, you may be able to significantly improve your financial situation through mortgage refinancing. Keep in mind that in order to qualify for a lower interest rate, you may need to demonstrate good credit. Since interest rates are at an all time low, now is the best time to consider refinancing to lower your monthly mortgage payment. If you are unsure if refinancing your home is best for your situation, be sure you speak with a qualified bankruptcy attorney about whether refinancing is a viable option to avoid a financial crisis.

If you are deciding whether or not to refi your home mortgage, there are a number of things to consider before you meet with a mortgage advisor, including: 

Is Now the Right Time?
To take advantage of the numerous benefits of refinancing your home mortgage, you should speak with a qualified mortgage advisor or attorney before you begin to experience significant financial distress. Since mortgage refinancing with bad credit can be difficult and you may not qualify for the lower interest rates that will ease your financial burden, you should speak to a lawyer about refinancing as soon as you anticipate financial problems.

Can I Afford the Fees?
Unfortunately, refinancing isn't free. To refinance your home loan, you will be charged origination, appraisal, loan application, inspection, and other fees. While these up-front fees may be worth it in the long run (paying $3,000 to lower your monthly payments and receive $100,000 in cash), you should be aware that refinancing your mortgage does require an initial investment. Consider speaking with a qualified real estate professional or mortgage broker. He or she should be able to evaluate your financial situation and help you determine whether the amount of refi fees balance the interest saved in your unique circumstance. In addition, evaluate your refinancing options and make sure to avoid unnecessary markup and junk fees that could greatly increase your refinancing expenses.

While mortgage refinancing is a viable way to help you get back on your feet, you should evaluate your unique situation to determine if it is the best way for you to avoid a financial crisis. An experienced mortgage broker should be able to help you evaluate your financial circumstances and assist you with reaching a resolution that most closely aligns with your goals for your financial future. If you feel you have been the victim of predatory lending practices, be sure to speak with a qualified attorney. In particular, be wary of businesses that prey on homeowners facing foreclosure and attempt to lure them into signing away their property. To locate a qualified lawyer in your area utilize the online attorney directory