How can I stop my house from going into foreclosure?

With millions of Americans falling behind on home mortgage payments, refinancing now may save a great deal of financial pain later. (iStock)

COVID-19 has not only been a wrecking ball on public health, but it’s also threatened the homeownership dreams of millions of Americans in 2020, with more havoc on the way in 2021.

According to the U.S. Census Bureau, approximately 5.8 million U.S. adults say they were on the way to either a home foreclosure or eviction by the end of 2020 due to the pandemic and subsequent economic slide across the U.S. Altogether, 17.8 million Americans report they are falling behind on either their rent or home mortgage payments, the Census Bureau reported.

“Although the unemployment rate has reduced significantly since its peak of 14.7% back in April, according to the Bureau of Labor Statistics (BLS) it’s still near double that of February before the pandemic at 6.9% as opposed to 3.5%,” said John Davis founder of ScoreSense, a Dallas, Texas-based credit score services company. “Some have taken a much lower salary than they have in the past and many have depleted their emergency fund and savings. Because of this, the fear of foreclosure is very real and widespread across the states.”

If stopping foreclosure or any other legal action is your end goal, then you may want to consider taking a closer look at your current mortgage.

How can I avoid foreclosure on my home?

For U.S. homeowners who believe a foreclosure scenario is looming over their property, one path to saving your home could be a home mortgage refinancing deal. Paying your mortgage is hard, but a refinance could make your home affordable.

“With mortgage rates at an all-time low, refinancing is a wise choice for those struggling to meet their monthly payments,” Davis said. “Refinancing for the balance of the mortgage with lower interest will reduce payments. Plus, if the mortgage load is still unmanageable, then the term of the refinanced loan can be extended to reduce them further.”

Explore all your mortgage refinance options by visiting Credible to compare mortgage rates and lenders.

WHEN SHOULD YOU REFINANCE YOUR MORTGAGE?

The immediate problem with a personal financial decline and the need to refinance into a lower home mortgage payment is people usually need good credit to secure a decent mortgage refinancing deal.

Why you should refinance your mortgages ASAP

The sooner a financially struggling homeowner gets going on a refinancing deal, the better.

“The time to work on a home refinancing loan with a foreclosure on the horizon is immediate,” said Bruce Ailion, a realtor with RE/MAX Greater Atlanta. “Waiting for your credit to deteriorate, or a layoff becomes permanent, or worse a bankruptcy filing is out of the question. Plus, seeking out a lender that lends to credit damaged people will result in a high-interest rate. If anything, this will drain needed resources.”

The good news is that mortgage lenders and homeowners are all in the same boat when it comes to the pandemic and all are trying to weather the storm together. Plug your information directly into Credible's free online tool now to compare mortgage rates and view your loan options.

HOW TO REFINANCE YOUR MORTGAGE WITHOUT CLOSING COSTS

“Speak to your lender as soon as possible and let them know you are struggling and do not want to default on your loan,” Davis said. “Discuss with them the possibility of refinancing to a manageable monthly repayment amount and be open to other options. Always remember it is in the best interest of the lender to find a solution together with you than to go down the foreclosure path.”

Financial experts also advise taking these steps when refinancing to help avoid household financial struggles.

Be honest with the broker or bank. Don’t avoid facts — especially negative ones — related to a loan refinancing application. “Even acknowledging a layoff is information a lender needs to know about,” said Benjamin Schandelson, a mortgage loan originator at MJS Financial LLC in Boca Raton, Fla.

Visit Credible to talk with experienced loan officers and get all your mortgage refinancing questions (like how this will impact your monthly payments and loan long term) answered.

HOW OFTEN CAN YOU REFINANCE YOUR MORTGAGE?

2 things to know before refinancing

Before you dive head-first into a mortgage refinance, make sure you do some research. There are at least two factors you should consider before you refinance your mortgages.

  1. Homeownership timeline
  2. Closing costs and fees

1. Homeownership timeline

The amount of time you expect to live in your current home is a big factor when refinancing a home loan.

“A general rule of thumb, assuming you plan to be in the home for at least three years,” said Bill Packer, chief operating officer at American Financial Resources, in Parsippany, N.J. “If you can earn back your costs in 12-18 months, it may make sense for you to refinance.”

If you see yourself in your home for that period of time (or longer), then a refinance may be the right move for you. Get started on your mortgage refinance today!

2. Closing costs and fees

Don’t jump at the chance of a mortgage loan refinancing deal until you know how the numbers will work out. “Refinancing a mortgage is a factor of three key items,” Packer said.

Here’s how Packer breaks those three items down.

  1. The after-tax monthly savings (the new mortgage payment compared to the old payment after allowing for any tax-favored treatment.)
  2. The amount of time that you intend to be in the home.
  3. The cost to obtain the new mortgage (especially closing costs.)

“Once you understand these three factors, you can then calculate your return and see where you stand financially,” Packer said.

Use a refinance calculator to help figure out how a new home loan will impact your personal financial situation. Credible can also help you determine if now is the right time to refinance your mortgage.

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