Foreclosure - Can refinancing help you with saving your home?

Foreclosure happens when the lender takes away your home, turns you out from it and sells it off to get back his money. This can happen, if you default on the loan payments, or if you are unable to make even the minimum payments. In fact, as per the reports, foreclosures have been happening at a record rate in the US. Foreclosure neither is good for you or your lender. This is because, foreclosure is a legal and complex process, which also is a costly affair too. In such a situation, home refinance is considered to be an option which is going to help you retain your home, and avoid the negative effects of foreclosure at the same time. So, if you are having problems with your mortgage payments and if you still would like to keep your home, you can try to refinance the home, in order to avoid the foreclosure.

Different causes and effects of foreclosure
Foreclosure can happen in different situations and these can be:

1. If you default on the mortgage payments
2. If you fail to stick to other terms and conditions of the home loan
3. If you fail to make even the minimum payments on the mortgage

Such situations can happen out of various problems. One reason can be an increase in the interest rate on the mortgage, which renders it unaffordable for the homeowner to make the payments. Or else, it can also happen if you lose your job and as a result your affordability, to make the payments on the mortgage.

As a result of the foreclosure, it is not only your home which you are required to lose. Foreclosure also has a huge negative impact on your credit score. It gets listed on your credit report, and lowers your credit score by around 250 points. As a result, it becomes tough for you to get any new mortgage or any new credit too.

Refinancing & other alternatives to avoid foreclosure

There are various options through which you may be able to avoid foreclosure. Some of these are the:

• Repayment Plan
• Reinstatement
• Loan Modification
• Forbearance
• Refinance

In case of the loan modifications and refinancing, you can opt for the traditional options or you can also try out the government backed options. These are the HAMP and HARP. However, if you would like to take the advantage of the government backed programs, you will have to do that within 2012. This is because, such programs have been expended till the end of 2012 and not beyond that. So, if you think that you are eligible for the government backed programs, and if you are having problems with your mortgage, it is high time that you opt for these programs.

However, there are many lenders who may not agree to your loan modification request or the repayment plan. In that case, the best option that is going to help you save your home is refinancing. So, if you would like to refinance, it is important for you to complete that within this year. The interest rates on the mortgages under the current market situation and financial perspective is considerably low. You never know when the economy is going to change its status, and this can result in increased interest rates on the mortgages, in the future. Though, the market watchers mostly had been of the view that the rates were not to raise much till 2014, "The recent reduction in financial stresses in Europe is a welcome development for the United States, given the important trade and financial linkages connecting our economies," said Mark Zandi, chief economist at Moody's Analytics (http://www.bankrate.com/finance/news/kiss-low-mortgage-rates-goodby... ). So, this can even result in an increase in the interest rates.

Under the present conditions, homeowners who have the interest rate on mortgages standing at more than 5%, may find it affordable enough to refinance their homes. However, still a question may be dominating your thoughts with regards to the refinance process. This is, if you should opt for refinance at this instant. Whether or not, you should opt for refinance in situ, would depend on your mortgage terms and conditions, the interest rate and your affordability and debt situations. Other than that, if the comments of the experts are to be followed, it is better not to wait for long.

The mortgage rates have been falling in the last five years; but in the next five years, it may be on the rise. You never know what changes are going to come in the coming years. Fresh reports show that the rates have already started to rise, though by a few points.