How to Refinance an Existing Mortgage

March 10, 2010 by Jay
Filed under Mortgage

In America today, tens of thousands of people, maybe more, are stuck with difficult or downright bad mortgages; payment arrangements they can’t meet. And that is creating a serious problem for many of them that may lead to a bank (or lender) takeover of the mortgaged property.

It’s called foreclosure and it’s certainly true that no homeowner wants to forfeit his or her home because of problems meeting monthly mortgage payments. As has been written about in newspapers all over America, banks (with government approval) wrote many bad mortgages for people who didn’t qualify.

These mortgages required little or no down payment and relatively high monthly payments that many borrowers (who didn’t have the money to pay for a down payment) certainly couldn’t meet. It has been happening all over America: people have been missing one, two or more monthly mortgage payments – falling deeper and deeper into a financial hole.

In the past, many banks simply reclaimed the property and sold it “at fire sale” prices. The unfortunate homeowner had to leave the home – forever – and find a new place to live. The mortgages that these people had were not standard fixed payment mortgages; they were plans that offered payment options, the lowest of which required monthly payments of interest-only. The result was increasing debt (as the principal was never paid down) … and unaffordable payments, even when interest was all that was required.

Fortunately, there is a way out for these people. Refinancing has always been a viable alternative for people unhappy with an existing mortgage. For people with cash flow problems, an inability to make even minimum payments under their current mortgage, another option currently exists.

The federal government has urged banks to work with cash-distressed borrowers on mortgage mediation plans. If the bank and the borrower can reach an agreement (and the bank wants to find a reasonable accommodation with the borrower), the mortgage will be reduced to reflect the current market reality: home values have dropped.

The reduced value of the home – and the reduced mortgage – lead directly to much lower monthly payments for the borrower; payments that he or she is able to meet based on a review of monthly income and overhead.

It’s a plan designed to help people save – and stay – in their homes. That makes it a very good plan. Mortgage refinancing and mortgage mediation are two very good ideas.

Remember: if you can afford your monthly mortgage payments, but you simply don’t like your mortgage, consult your broker or speak directly to the bank that holds your loan. Tell whomever you speak with that you are interested in refinancing because you want lower payments or, perhaps, you want to take cash out (many refinancing plans will allow you to receive cash at the closing).

If you are currently having trouble meeting your monthly mortgage payments, you probably need the help that is available through mediation. Speak to the bank that holds your loan. Ask about mediation plans while there is still time to dramatically reduce your payments and keep your home. Get started today.