Refinancing May Prevent Foreclosure
By Elizabeth Culpepper,
il-odm.org Staff Writer
Almost a quarter million Americans lost their homes through the foreclosure process last year and half of those (140,000) never talked to their lenders to try and work things out.
Foreclosures are expected to keep rising this year and again next year, primarily because of adjustable rate mortgages (ARMs), or even those with “interest only loans”. Some of these borrowers could watch in horror as their monthly mortgage payments come close to doubling over the next few years.
What can you do? Read over your original mortgage papers that you received at closing and see how often and by how much your payments can rise. You may want to consider refinancing NOW or making an appointment with a financial counselor, but most importantly, communicate with your mortgage lender if you get into trouble. If you are going to be late with a payment you need to call the bank. Do not avoid phone calls from your mortgage company. You do not want them to play hard ball with you. You need them on your side at a time like this. With rising gas prices, health care costs, and interest rates on credit cards, we sometimes get in over our heads. Now is the time to stop and take stock of our financial situation.
The financial institution that holds your mortgage more than likely will work with you if you are open and honest with them and if you are making a good faith attempt to keep your mortgage current. Actually, foreclosing on a home costs the lender a good deal of money, as they have to pay legal fees for foreclosing and reselling your property. It also costs them to maintain the property during the time between foreclosure and reselling.
They may offer to help you refinance, or offer you a re-payment plan which will allow you to catch up on any missed payments. There may be other options such as loan modification; or forbearance (which postpones the interest or payments for a fixed period but this extends the life of the loan). The main idea is to communicate with the lender so that the creativity of how to solve the problem can begin. With the housing market beginning to slump, banks and lending institutions are offering some favorable terms for refinancing, but the key is to shop around.
Talk about options to refinance before settling on foreclosure.
Also, please read up on foreclosure scams.