When facing foreclosure, refinancing your home can act as an alternative to bankruptcy. It’s also often easier than obtaining the original loan was. You already own the property, plus, if you’ve owned it for a considerable amount of time, you likely have equity. This does not, unfortunately, mean that it will be significantly cheaper. For this reason, it’s important to weigh whether the savings from a lower interest rate will offset the costs associated with refinancing. Here are some steps to take in doing so.
Steps to Determining if You Should Refinance Your Home
- Evaluate your finances – You should undertake to refinance the same way you tackled getting your first loan. This means assessing your credit history and correcting any errors to get your score as high as possible. This way, you’ll qualify for the lowest interest rates. In addition, you can use online mortgage calculators to see where you stand in qualifying for refinancing.
- Compare mortgage rates – Aside from getting a lower monthly payment, refinancing provides you with the opportunity to switch mortgage types. Analyze alternative loan types to see which one offers the greatest benefit if you refinance.
- Think long-term – When using tools to evaluate your finances and compare mortgage rates, you’ll want to think long-term. Consider not only the monthly payment and interest rate but the cost over the loan’s entire life. In doing so, you’ll be able to determine your break-even point. This is the amount of time it will take you to recover the costs of refinancing.
Deciding whether to refinance is a numbers game. It’s about contrasting alternative loan types against your own and calculating which one offers the greatest long-term financial benefits. If you are attempting to halt foreclosure by refinancing, contact your local bankruptcy attorney.
The Texas bankruptcy lawyers at Shuster Law, PLLC help clients avoid foreclosure and tackle their mortgage problems head-on, by means of Chapter 7 bankruptcy, Chapter 13 bankruptcy, or bankruptcy alternatives such as refinancing your mortgage.