Even though many economists are forecasting a future foreclosure crisis across the country, the crisis has already arrived for many Americans. In fact, according to reporting from NBC News, the third quarter of 2021 brought a 32% increase in the number of home foreclosures over the previous year.
If you are behind on your mortgage, you may be exploring your options both for keeping your home and for avoiding the catastrophic credit consequences that often come with foreclosure. Refinancing your mortgage may be one of these.
Get a fresh start
Even if your mortgage is delinquent, you probably have the option of refinancing. With a home refinancing, you secure a new loan to pay off your existing mortgage. This may give you a fresh start, as you may no longer have to deal with the psychological burden of prior missed payments.
Take advantage of your home’s equity
Refinancing a home that has a delinquent mortgage can be more difficult. Your first step is likely to talk with your lender to determine your eligibility for refinancing. If you have equity in your home, though, the risk to the lender may be minimal.
Do not wait too long
If you have missed even a single mortgage payment, your credit score may not be as good as it once was. This can be problematic with refinancing, as a lower credit score may force you to pay higher interest rates. Still, even if your interest rate goes up, refinancing may allow you to save your credit score. Then, in the future, you may be able to refinance again with a lower interest rate.
You do not want to wait too long, however, as continuing to miss mortgage payments is likely to cause your credit score to plummet. Ultimately, if your credit score drops too low, you may lose the ability to refinance your home.