Death in the family, illness, loss of a job, or divorce can take a great toll on our daily lives and finances. If tragedy strikes and you are unable to afford your monthly mortgage payments and find yourself falling behind, you may be able to modify your home loan to catch up and avoid foreclosure.
Why Refinance Your Home?
Why refinance? Most times, homeowners refinance their homes in order to take advantage of the current rate environment with the goal of paying less interest over the life of the loan. To put it simply, refinancing can be broken down into revising the loan’s interest rate, terms, payment schedule—typically when the market and your credit has improved.
Essentially, you are replacing your current mortgage for a new one.
Refinancing Can Save You Money, When Done At The Right Time
Refinancing your home can save you money, but it greatly depends on your unique situation and timing. For one, your home will have to build up equity in order to refinance it, since it will be used as an asset. So it is a good idea to have lived in your home for a few years, but don’t wait too long—waiting too long will cause the amortization process to begin again which will make your payments go towards the loan’s interest rather than principal.
Another factor to take into consideration is the cost of refinancing. It is critical that you know if you can you afford the fees associated with it, including:
- Closing costs
- Application fees
- Loan origination fees
Get The Right Paperwork
Like with your first mortgage, you will need to gather and submit the right paperwork in order to refinance your home. You will need:
- Bank statements
- Credit report
- Payment history
- Employment pay stubs
- Tax returns
- Statement of assets and debts
However, if you are eligible for and doing what is known as a streamline refinance you will be able to speed up the process with less paperwork. While you can refinance your home as many times as makes financial sense for you, it is not often recommended by lenders—but it can be done. You will need to have a clear goal and the numbers have to add up, so be sure to discuss first with your lender and financial advisor.