In times of financial emergency, refinancing can solve a number of problems. Cash out refinancing can pay any arrears on loans, and also pay off loans at higher interest rates. Refinancing for debt consolidation can allow for a lower monthly interest bill, and refinancing a mortgage can often reduce monthly payments significantly, making the difference between financial struggle and having a little breathing space.
Emergency refinancing is not something one plans to do, but there are times in life when unforeseen circumstances make it necessary to refinance in a hurry to solve a pressing financial problem. Whilst it is preferable to plan for mortgage refinancing and follow the process of refinancing in at your own pace, there will always be a proportion of people who find themselves in need of emergency refinancing.
It is vital to avoid foreclosure. If you think you are in danger of foreclosure, you must act immediately to prevent your lender from starting foreclosure action. Nobody wants you to lose your home, believe it or not, even the refinancing mortgage would rather not foreclose if you gave them any other viable option.
It is very important to be proactive when you start to fall behind with your mortgage payments. In the current economy, the banks will do just about anything rather than put another home on sale in a depressed market. Sometimes, it is a simple as refinancing your home to free up some cash and pay off the arrears. Alternatively, you can restructure your mortgage if you think your financial difficulties will last over a longer period.
Even if you have decided that you can't afford to keep your home, it is better to avoid foreclosure by refinancing or restructuring, and then sell your home later for the highest refinancing mortgage price, without the pressure of a forced sale.
Mortgage refinancing can sometimes be the only way out of a difficult financial situation. Once a homeowner has missed a few mortgage payments, for whatever reason, protecting the home from foreclosure may require refinancing. For example, mortgage refinancing could be used to release some of the equity in the home as cash. Known as cash-out refinancing, this form of mortgage refinancing allows the arrears to be repaid in a lump sum.
If mortgage rates have gone down since the original mortgage was taken out, then mortgage refinancing is likely to result in a lower monthly mortgage payment, too. The savings can be applied to further reducing debts.
Debt consolidation refers to refinancing your home for an amount large enough to repay the balance owing on your mortgage, and any other debts such as store cards, credit cards, and personal loans. These loans are usually at higher interest rates than mortgages, because they are unsecured, so refinancing for debt consolidation is likely to result in a much lower monthly interest bill overall. Again, the savings can be applied to repaying the principal.
If your credit is poor, there is no need to despair. Refinancing with bad credit is possible - you just have to look a little harder to find the right lender. Of course, refinancing after bankruptcy presents some difficulties, but it is not impossible either. Bad things happen to good people, and everyone understands that. The important thing is to stay calm and focus on moving forward. No matter where you start, you can follow the steps to financial freedom.
While we don't like to think we need emergency refinancing, sometimes it can be the best thing that ever happened to us, starting us on the path to getting out of debt completely and enjoying true financial freedom.
Home owners in the US must take stock at this point in time, and ensure they are well-placed to survive an extended period of higher interest rates. Fixing mortgage interest payments at these historically low rates for a 30 year period may well be the best financial decision a home owner could make.
Mark Bennett is a staff writer for Money Talks, and contributes regularly to other financial sites. This article is part of his series on refinancing, which can be seen at EmergencyRefinancing.com.
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