Refinancing your home mortgage is often difficult for people who are already facing foreclosure. With credit problems, other debt or a job loss, the likelihood of a successful home mortgage refinance are not good. If you want to increase your chances, the one single biggest thing you have to do is continue to make your mortgage payment on time or catch it up if it’s behind. If you’re serious about making this work, you may want to ask for help from family to catch up and repay them from the refinance proceeds. Your home mortgage payment is your single biggest credit indicator when applying for a new home loan, including a refinance, so find a way to keep it current and your chances of a successful refinance improve.
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If you have sufficient equity and a steady job, or other qualifying income, you may be able to qualify for a refinance loan. If you can pay off other debt as part of the refinance or extend the term of your loan so the payment is lower, you may be able to solve the problem with a refinance. Too often though, a refinance is often just a band-aid that results in the new lender foreclosing a little later. Bottom line, if the refinance doesn’t lower your total monthly bills - either by rolling in other debt, lowering your interest rate (not likely if you are in this situation) or giving you a longer term loan - it can’t really do more than delay the inevitable.
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Refinancing also costs money. You’ll have closing costs. Even refinance loans which advertise no closing costs or no “up front fees” will build the costs into the loan. They may do this explicitly by making a larger loan to cover the costs or they may do it implicitly by charging a higher interest rate. Aside from the closing costs, most loans made to people facing foreclosure or in trouble financially are so-called “subprime” or “nonconforming” loans which can carry interest rates several percent above the commonly quoted current rates. (This isn’t illegal or even “unsavory” - these loans carry a higher risk and the higher interest rate offsets that risk across the loan portfolio. The higher interest rate is the price you pay for having landed in a high risk position; unfortunately you pay that price even if the high risk position occurred through forces beyond your control.)
