Paying Off Mortgage and Retiring – 5 Reasons Why One Should Come Before the Other

Paying Off Mortgage Before RetirementBeing free of debt is a great way of enjoying your retirement years. Most people agree that paying off your mortgage before you retire is something that will give you peace of mind and more financial freedom. However, many people end up retiring before their mortgage is paid off, which might not be necessarily a bad thing. Like everything when it comes to mortgages, what is best for one home owner may not be the best for another. Essentially, paying off your mortgage before your retirement years is advantageous, but there are cases in which not paying it off is the better choice, especially if getting rid of your mortgage involves a large financial sacrifice (Read: Should You Rely on Home Equity When You Retire? Think Again!).

When is it better to Not Pay off Your Mortgage

Not having to worry about a large debt after retiring will most likely make your life much easier. Unfortunately, paying off a mortgage earlier is not always a good idea. With today’s interest rates, you are probably paying less than 5 percent on your mortgage loan, and more than 10 percent on your credit card balances. Mortgages are considered a good debt, which means that you should pay them off last, and worry more about other type of debt.

Unless you have large assets that you can use while retiring, you should think twice before paying off your mortgage. Your retirement accounts have more tax advantages, so you should put your money into those before paying off debt. An even worse idea is to pay off your mortgage using money from your retirement accounts. You will have to pay a large penalty for the withdrawal, and end up spending more than you would on your mortgage.

Also, if you are able to refinance your mortgage loan, you could be saving thousands of dollars. However, refinancing is expensive and you have to include closing costs in your calculations before deciding if refinancing will save you money, or you should keep paying the mortgage as before (Read: Do You Make These Mistakes? Don’t Kill Your Mortgage Refinance!).

Reasons to Pay Off Your Mortgage before Retiring

There are more reasons to pay off your mortgage before retiring than there are to not pay it off. To find out even more reasons click here. Taking the necessary steps to make sure that your retirement accounts are replenished is very important before deciding whether paying off your mortgage is worth it or not. Here are the reasons why getting rid of your mortgage should come before retiring.

  1. Peace of mind. After years of making large payments each month, you can finally say that you truly own your home. This is especially important after retiring, when your income probably won’t be as large as before, and the chances of generating additional income are thin. Finding a job, investing or starting a business in your retirement years is unlikely, so not having to worry about the risk of losing your home if something unforeseen happens, or about having to make a large payment each month, is a blessing. To learn more about the benefits see this.
  2. Savings in interest. Over the life of a mortgage loan, you will be paying tens or hundreds of thousands of dollars in interest, so paying it off as soon as possible means that you avoid paying all that interest. Even refinancing into a shorter loan will bring great savings, as long as you don’t spend a lot on the closing costs. Not only will you be mortgage free by the time you reach your retirement years, but you can also use the money that you saved for something that will make your retirement much more enjoyable.
  3. It allows you to focus on spending less. The process of paying off your mortgage allows you to focus on saving for retirement, as well. If you wouldn’t have a monthly mortgage payment, you might be tempted to use that money to make other large purchases, like an expensive car. Deciding to pay off your mortgage puts things into perspective and gives you a chance to focus on your future plans.
  4. Build equity. Paying off your mortgage means that, if you ever need money once you are retired, you can take out a loan against the equity in your home or sell the home and have access to all the equity in it. You can use the money to pay your medical bills, buy a condo, or even for traveling (Read: Home Equity Loan).
  5. Avoid higher interest rates if your rate is adjustable. Adjustable-rate mortgages can be either advantageous or disadvantageous, depending on how the interest rate fluctuates. If the interest rate keeps rising, then you might end up with a larger down payment during your retirement years, so paying your mortgage off makes sense.

Not paying off your mortgage before retiring makes sense in some cases, but not having to pay a large bill each month is more beneficial. Unless you have to dip into your savings and retirement accounts to pay off your mortgage, the peace of mind that not having a mortgage brings outweighs the pros of keeping your mortgage during your retirement years.

Mortgage Refinancing: The Overlooked Mistakes You Want to Avoid!

Mortgage Refinancing-The Overlooked Mistakes You Want to Avoid- 150x150Mortgage refinancing can be a true life saver when done correctly and at the right time. Making your monthly mortgage payment smaller will free up cash that can be used for other monthly expenses or be put in savings. But before you are lured by the smaller mortgage payments and interest rates, you must be sure that you understand how refinancing works. Understanding this process is the only way in which you can make sure that you avoid making mistakes that will cost you time and money.

Refinancing is expensive and it comes with considerable risk, especially for those who are first time home owners and for those that are refinancing for the first time. The most important thing when refinancing is finding out if the new loan is truly saving you money. Taking refinancing costs into consideration is very important when comparing your current loan to the new loan. Another important thing to consider is how long you plan on living in your home. In order to cover the cost of refinancing, you will have to live in your home for two or more years.

Making a mistake when refinancing is very easy and you will end up regretting making the decision to refinance. But do everything by the book and refinancing will prove to be exactly what you needed to make your life easier. Here is a list of the mistakes that you want to avoid making when refinancing.

Mistake #1: Refinancing Multiple Times

In rare cases, refinancing multiple times makes sense, especially if it is done over the course of a few years. But most of the time, if done very often, refinancing multiple times will result in losing money instead of saving it. Low interest rates are attractive for everyone, and most home owners will give refinancing a thought when interest rates are near record lows. Home owners who have recently refinanced might get the idea that they will save even more money if they refinance again, because the rates are so low.

Unfortunately, refinancing is expensive, costing up to 6 percent of the loan amount. Saving enough in interest for the closing costs to be covered is unlikely if you recently did another refinance. This means that your loan balance will increase, negating the savings that refinancing should bring, making you lose money. It is recommended that you don’t refinance before recuperating the closing costs from your last refinance.

Mistake #2: Not Shopping Around for a Lender

Lenders are always competing with each other, so shopping around for a refinance is a smart thing to do. Even if the first loan that you are offered has a low interest rate, good terms, and seems like exactly what you’re looking for, you still have the option of contacting other lenders. By comparing mortgage lenders and what they are offering, you could save thousands of dollars.

If you have a good relationship with your current mortgage lender, he might offer you a good deal on refinancing. Even if that is the case, it doesn’t hurt to take a look at what other lenders are offering.

Mistake #3: Ignoring Some of the Costs of Refinancing

If you are planning on refinancing your mortgage, you need to find out if the savings outweigh the cost of refinancing. Refinancing closing costs involve several fees, some high and some low. Not taking into consideration some of these fees, like the origination fee, which can be a few thousand dollars, can make refinancing more appealing, but there is no way of avoiding this fee. You might think that you are saving money by refinancing when in fact the closing costs will be much higher than the savings you are making by taking out a loan with a lower interest rate.

Mistake #4: Not Locking In Your Interest Rate

Not locking in your interest rate is like gambling. You hope that the interest rates will go lower before closing, and you end up with a more advantageous rate, but you are aware that there’s a risk that the interest rate will increase, making your payments higher than you anticipated.

Not locking in your interest rate is especially dangerous with refinancing, because you have to make sure that refinancing will actually help you save money. If you come to the conclusion that you are, indeed, saving money with the interest rate that your lender is offering, but don’t lock in and the interest rate increases, the whole refinance could become just a waste of time and money (Read: Mortgage Refinancing Guidelines).

Mistake #5: Extending Your Mortgage Loan’s Term

When refinancing, you are basically resetting the term on your mortgage loan. Your monthly payments will be lower, but you will be paying more in interest, especially because most of the payments go towards the interest when taking out a new mortgage loan.

Extending your mortgage loan’s term would be a mistake, and you should aim towards taking out a loan with a term close to what has remained on your current mortgage, or even shorter.

Taking precautions before refinancing will help you find out if refinancing is the right step for you, and make sure that the whole process goes smoothly. Your goal is to save money on your mortgage, so avoiding these mistakes should be your top priority when refinancing your mortgage.

How to Take the Headache Out of Cash-In Refinancing

How to Take the Headache Out of Cash-In Refinancing-150x150You have probably heard of cash-out refinancing, which allows the borrower to leave the closing with a little extra money. This type of refinancing was very popular a few years ago, before the housing market crashed. The United States Housing market is currently still recovering, so cash-out refinancing is not so popular anymore.

A type of refinancing that is pretty much the opposite of cash-out refinancing is cash-in refinancing. With a cash-in refinancing, the borrower makes cash payment when refinancing, instead of receiving a cash payment. This type of refinancing is used by more and more borrowers because it helps them meet the lender’s requirements. The borrower makes a payment towards his or her mortgage balance, and then takes out a new loan for a much smaller amount. Most people who choose to do a cash-in refinance have money sitting in savings accounts that yield low returns, and would like to put that money to better use.

Is Cash-In Refinancing a Good Idea?

Paying off your mortgage easier or earlier is a great feeling, but you might be asking yourself if that money would be put to better use if you invested it in something else. You could be investing the thousands of dollars that you are using in a cash-in refinance elsewhere, but this type of refinance can also be considered a good investment. Reducing your mortgage debt will get you a lower interest rate, which would bring you some large savings and possibly be more than the return that some investments would generate.

Cash-in refinancing is a great opportunity for home owners whose homes have declined in value. If the home is appraised for a low amount, the equity in it might not be enough to meet the lender’s minimum lending requirements, so making a large payment will certainly help you qualify for a refinance much easier. Making that payment required in a cash-in refinancing will also help you avoid having to pay for Private Mortgage Insurance.

You might want to reduce your mortgage term, from 30 years to 15 years for example, but you wouldn’t be able to afford the much larger monthly payment. By doing a cash-in refinance, you lower the mortgage balance, making it much easier for you to reduce the term of your mortgage loan and afford the new monthly payment.

Of course, like with any type of refinancing, there will be a couple of years or more until the amount of money that you used to pay the closing costs with will be recovered by the savings from refinancing (Read: Refinance Loan Types and Closing Costs).

Another downside is that you have to come up with a large amount of money for the required cash payment, which may cause you some trouble if you are taking it from a 401k, for example. Taking money from a 401k will attract some penalties, such as recovery or repayment costs. Obtaining the money by selling stocks could result in having to pay a capital gains tax.

The thought of saving thousands of dollars by doing a cash-in refinancing is very appealing, but, like with any type of refinancing, you must consider all the risks as well. Your financial situation and future plans should be the most important factors affecting the decision to refinance. If you come to the conclusion that doing a cash-in refinance will save you money and make your life easier, then you shouldn’t encounter any problems as long as you have done your homework and understand what it involves.

Here’s What You Can Do When Turned Down for Refinancing

Here's What You Can Do When Turned Down for Refinancing- 150x150Refinancing is a great way of saving money on your mortgage when interest rates are low. Refinancing has strict guidelines, and making your mortgage payments on time may not be enough to convince your lender to allow you to refinance. Mortgage refinancing requires a home appraisal, a significant number of documents that show your income and assets, and a good credit score. Not meeting one of the lender’s requirements may result in a denial. Fortunately, being turned down for refinancing is not the end of the world and you should know that you still have options. Here are a few reasons why you may be denied and what you can do to make refinancing possible.

Little or No Equity in Your Home

The number one reason why home owners are being refused when trying to refinance is the lack of home equity. Your problems don’t even have to go as far as being underwater on your mortgage, or owing a larger amount than your home is worth. Simply having low or no equity in your home can trigger a denial from your lender, because they prefer a borrower who has a nice amount of cash tied up in his or her home. The simplest way out of this situation is to come up with more cash, but, if you take into account the high refinancing closing costs, you might realize that a few extra thousands will be hard to find.

An alternative would be the Home Affordable Refinance Program (HARP), designed by the government to help home owners with little or no equity in their homes. Recently, this program has undergone some changes, which should help you get approved easier than before. The program is designed for home owners who have less than 20 percent equity in their homes, but some lenders might use their own guidelines when deciding if you qualify for HARP.

Another alternative would be refinancing into a Federal Housing Administration (FHA) mortgage. FHA mortgages require a low down payment and equity, but you may be required to pay additional insurance on this type of government insured mortgage loan.

Low Credit Score

Your credit score has a large impact on not only your interest rates and the loan value, but also on whether you will be allowed to refinance or not. If your credit score is bad, your only chance of refinancing is by improving it. It might take a year or two, but if your credit score wasn’t affected by anything major, you should get it into a more favorable range with little effort. Paying your bills on time is the first and most important step when trying to increase your credit score. If, however, you have a large blemish on your credit report, such as a bankruptcy, then increasing your credit score will prove to be more difficult and can take up to 10 years.

Low Income

Lenders usually require your debt to not exceed 43 percent of your monthly income, while monthly mortgage payments, property taxes and insurance are limited to 30 percent. Reducing your debt can help tremendously when trying to look better in the eyes of a lender. You could quickly pay off some or all of your debt if you have access to savings or other investments. Some of these solutions might not be the best, and it all depends on your situation, and how much you want or need to refinance.

Of course, the simplest thing you can do when being turned down for refinancing is talking to another lender. Lenders are in competition and sometimes have significantly different offers for their customers, so shopping around is always a great idea, even if you are approved by one lender. You might find a more attractive offer with a lower interest rate or closing costs somewhere else. Don’t be discouraged if your refinancing is declined because there are ways in which you can drastically improve your chances in a very short amount of time.

Do You Make These Mistakes? Don’t Kill Your Mortgage Refinance!

Do You Make These Mistakes- Don't Kill Your Mortgage Refinance-150x150Making lower payments on your mortgage is a great way to save money and make your life easier. The most common way in which you can reduce your monthly mortgage payment is by refinancing. This can also be the most beneficial way, which can save you a significant amount of money. But going from saving money to losing money is really easy when it comes to refinancing.

Refinancing might seem like a great idea at first glance, but it is not for everyone. There are several factors that have an influence on whether refinancing is good or bad for your situation. When refinancing, many home owners often make mistakes that, even if they won’t create problems in the beginning, will end up costing them in the long run. Refinancing is more complicated than it was years ago- the requirements are stricter, more paperwork is needed- so it’s easy for a borrower to make a mistake.

Here are the most common mistakes that borrowers make when refinancing, to help you avoid making them when you decide to refinance.

Convincing Yourself That Your Home is Worth More Than It Is

Being unrealistic about the value of your home is a sure way of ruining a refinance. Many areas have seen a decline in home prices, so your home’s price has probably fallen too. Most refinances today are denied because the home is appraised too low, so the lender won’t give out loans that are larger than the appraised value.

Not Shopping Around

You might have a great relationship with your current lender, and he might give you a special deal on your refinance, but it never hurts to shop around for an even better rate. Lenders can also reduce or even waive certain closing costs, which will also influence how much you will be spending on refinancing. Even a small difference in interest rate can mean a lot of money over time, so it’s important to look around, see which lender can offer you the best deal.

Not Taking Closing Costs into Consideration

One of the biggest reasons many home owners choose not to refinance are the high closing costs. The closing costs are one of the main factors that should be taken into account when deciding whether to refinance or not. Interest rates offered by most lenders will probably look very attractive, but you can end up losing money if you don’t take closing fees into account.

Letting Your Credit Score Decrease

Even if you find a very attractive refinancing rate and a lender who is willing to waive some of the closing costs, refinancing with a low credit score will most likely result in a waste of time. Not having a good credit score will attract high interest rate, or even the lender’s refusal to give you a new loan.

Creating New Debt During the Refinance

New credit cards or loans can seriously hurt your chances of being able to refinance. Additionally, you’ll have to provide even more documentation to justify the new debt. It’s best to hold off acquiring new debt until the refinancing process is over and your new loan is granted. It’s always best to keep new debt low, even after refinancing, and talk to your lender about what the implications are.

Refinancing Multiple Times

Refinancing repeatedly in a short period of time will not save you money. Each time you refinance, not only do you have to pay some hefty closing costs, but you are also resetting your mortgage, meaning that over time you will pay significantly more in interest. You can also end up having to still make mortgage payments during your retirement years.

Your decision to refinance should not be affected only by the low interest rates. Always take into consideration the closing costs when trying to figure out if refinancing is the right step for you. Not paying attention to all of the details can become very expensive with refinancing. All mistakes can be avoided by doing a little research, making refinancing an easier process, which will truly save you some money.

Addicted to Refinancing Your Home Multiple Times? You’re Not Alone

Addicted to Refinancing Your Home Multiple Times- You're Not Alone- 150x150A few years ago, when the housing market was booming, many home owners started to take advantage of the lower interest rates by refinancing their mortgages. For many borrowers refinancing is a great opportunity to save money on their mortgage, but there are other factors besides the interest rates that should be considered when determining if refinancing is a good choice.

Refinancing a mortgage multiple times has become a trend among borrowers, with more than 2.2 million refinances recorded since 2009. Because interest rates are still near record lows, there really aren’t any reasons for home owners to stop refinancing. Normally, refinancing a mortgage is an expensive process, so the high cost doesn’t always financial sense for home owners to go through with it, even if the interest rate on the new loan is significantly lower.

But lenders are coming up with ways of attracting refinances by lowering the closing costs or waiving certain fees, making refinancing much more accessible. Closing costs are not the only factor of what home owners should consider before refinancing. Many mortgage loans also include a prepayment clause, which force the borrower to pay a steep penalty if they wish to pay off their mortgage earlier. Some lenders are even willing to waive the prepayment penalty. Don’t be fooled, though. Lenders usually recover the waived and lowered fees by charging a higher interest rate.

Should You Refinance Multiple Times?

Through history, as interest rates went down, the number of home owners who refinanced went up. Right now, with interest rates on the rise, but still near record lows, and the job market recovering, people are in a rush to refinance their mortgages. Refinancing more than once makes sense, but only if you do your homework, and come to the conclusion that it will actually save you money. Many borrowers refinance thinking that a lower interest rate will save them money, while the cost of refinancing may actually cause them to end up with a more expensive loan, which will result in losing money.

Refinancing and getting a lower interest rate will not only reduce your monthly mortgage payment, but will also reduce the principal on your mortgage. Having a lower mortgage payment will free up money that can be used to make other purchases or even pay off other debt, which will increase your credit score, making future loans more accessible.

The downside to mortgage refinancing is that, with each refinance, you are basically resetting your mortgage term to a longer term, such as a 30-year term. This means it will take you a longer time to pay off your debt. Refinancing also requires a lot of running around, gathering several documents and more scrutiny on your credit score. The biggest downside of all is that refinancing is normally an expensive process, which can actually cause you to lose money.

Refinancing isn’t really a viable option for borrowers with low credit scores. Even if the lender is willing to waive some of the closing fees, applying for refinancing with a low credit score will either get you rejected, or you may find that there is no way to receive a loan with a lower interest rate.

Refinancing multiple times pays off for many home owners, especially if they manage to secure a lower interest rate and the lender is willing to waive some of the closing costs. When trying to determine if refinancing again is a good idea, make sure that you take all of the costs into consideration, or you might end up paying more than on your previous mortgage loan. Saving money by refinancing is more than just getting a lower interest rate from your lender. If you do the research and come to the conclusion that refinancing again is worth it, then doing it multiple times is a wise choice.

How is Your Mortgage Affecting Your Net Worth?

How is Your Mortgage Affecting Your Net Worth- 150x150Buying a home and becoming home owners is a dream come true for many people and families. But most of the time, making such an expensive process involves borrowing money. A mortgage loan is very beneficial, and will help you become the owner of a home, but it will also affect your net worth, especially if you are refinancing. Refinancing a mortgage is a good way of lowering your monthly mortgage payment, but before you consider refinancing, you should take a close look at what you are getting into and ask yourself if this is only a temporary solution or one that will actually save you money.

How to Determine if Mortgage Refinancing is Worth It

The most widely used method of determining if mortgage refinancing is a good choice for you is by calculating a payback period. This is done by finding out in which month the sum of the monthly savings made by refinancing will be larger than the overall cost of refinancing. If reaching that sum takes less time than the amount of time that you will be living in the home, then you can conclude that refinancing is a wise choice.

Another way in which you can determine if refinancing your mortgage makes sense is to compare the amortization schedule of the original mortgage loan against the amortization schedule of the new loan, while including the refinancing costs into the equation. Then, subtract the difference between the two monthly payments from the new loan’s principal. Find the month in which the principal of the new loan will be less than the principal of the original loan. That’s when the economical payback period will be reached.

Will Refinancing Lower Your Net Worth?

Home owners refinance in order to reduce their monthly mortgage payment and free up money for other purchases or investments. While refinancing offers great benefits, its long-term effect is that it will have an influence on your net worth. Mortgages are considered good debt, but the balance sheet doesn’t differentiate between good or bad debt. Refinancing could make repaying your debt take longer and take thousands of dollars from your net worth over time.

Refinancing without lowering your net worth can be done by keeping the amortization the same and continuing to make the same or even larger monthly payments.

Home refinancing is an expensive process that, if you are not being careful, will lower your net worth. Before refinancing, try to compare the cost of refinancing against your savings. That is the only way of finding what kind of an effect will refinancing have on your net worth.

See How Easily You Can Refinance Your Mortgage the Second Time Around

See How Easily You Can Refinance Your Mortgage the Second Time Around-150x150Refinancing can save you lots of money, especially right now with interest rates near record lows. But refinancing can quickly turn ugly if you don’t pay attention to every detail. Most times, refinancing your mortgage looks great at first glance, but you need to know when to refinance and how often.

Lately, interest rates have started to increase again, but rates were at record lows recently. Many home owners have taken advantage of the new interest rates and refinanced their mortgages. But some have been doing it again and again without seriously taking into account the negative aspects of refinancing multiple times.

Reasons for Refinancing a Second Time

Generally, home owners are advised to not refinance more often than every 3 years because the cost of refinancing is high and can quickly become a burden, making loans actually cost more than if they had stayed with the initial interest rates. The truth is that if you can refinance for a much lower interest rate and plan on living in the home for a long time, then refinancing should be considered, even if it hasn’t been 3 years since you last did it. Here are a few reasons why refinancing a second time is an attractive option.

  • First, and most important, the more you can lower your interest rate, the more sense it will make to refinance again. Lowering your interest rate by, for example, 1 percent will result in great savings, which will far exceed the refinancing cost. Interest rates are on the rise right now, but they are still low, so refinancing again might still make sense. Before refinancing a second time, you must make sure that what you save in interest costs will exceed the cost of the refinance; otherwise, you will be losing money.
  • Refinancing again can also help you remove a borrower from your mortgage. If, for example, you bought the home together with a friend or family member and one or both parties no longer wants to have their name on the mortgage, this can be rectified by refinancing. Most lenders will also require you to refinance if you want to remove your spouse from the mortgage after divorce.
  • Refinancing for a second time before the recommended 3 years also makes sense if your financial situation changes. For example, if your income decreases, you might not be able to pay your mortgage anymore because the monthly payments are too large, so refinancing into a mortgage with longer terms will lower your payments. Changes in your financial situation can also mean that your credit score has improved, which will help you qualify for a better interest rate.
  • A cash-out refinance can make sense, even if you just recently refinanced. This kind of refinance occurs when you take out a larger mortgage than the one you have now and receive the difference as cash. A cash-out refinance can provide money you might need for repairs, improvements, medical bills, or school tuition, but you need to understand that this will lower the equity in your home, so you will receive significantly less money if you decide to sell your home (Read: Is Cash-Out Refinancing a Good Idea?).

Refinancing your mortgage the second time around should not pose any difficulties, unless your credit score has gone down or you  are facing other financial issues. You must keep in mind before starting the process that refinancing is expensive. Many home owners are so blinded by the new lower interest rate that they forget to take the refinancing cost into account and end up actually paying more than they did for their initial loan.

Need Assistance with Mortgage Loan Modification? These Services Can Help!

Need Assistance with Mortgage Loan Modification- These Services Can Help- 150x150Owning a home is a common goal that people have during their lifetime. Unfortunately, during times of economic unrest, owning a home can turn into a nightmare if you are unable to pay your mortgage anymore. The prospect of losing your home is frightening, and it’s something that will affect you financially and emotionally for a long time. Besides having to give up your home, the whole process will have a big impact on your financial situation, making it extremely hard or even impossible for you to be able to qualify for a new mortgage in the near future.

If you find yourself in danger of losing your home, saving it from foreclosure should be your main objective, and one way you can do it is by getting your lender to agree to a mortgage loan modification. Time is of the essence here, so calling your lender as soon as you notice any signs of trouble will increase your chances of getting approved for a mortgage loan modification. Lenders are not obligated to agree to a loan modification, but they want to avoid foreclosure as much as you do, so it is important for you to make sure that a mortgage loan modification is the way for you to get back on your feet financially, or else it would just be a waste of time for both parties involved.

Do You Need Help With the Mortgage Loan Modification?

A mortgage loan modification will probably involve several long discussions with your lender, and many home owners may not have that much free time, so hiring someone to do it for them could be the right choice, in this case. The truth is that the borrower can do most, sometimes even all, of what the mortgage loan modification professional can do. The most important thing here is to pay your mortgage, so hiring someone to do something that you could do yourself, would just be a waste of money, which could be used to get you out of this situation quicker.

But some people just won’t have the spare time to deal with a mortgage loan modification, so hiring someone to do it instead makes more sense. Others may think that they don’t possess enough knowledge on the subject to deal with loan modification themselves, in which case it also makes more sense to seek help, whether it’s from a professional, a relative or a friend.

Who Can Help With a Mortgage Loan Modification?

If you think you can’t tackle pursuing a mortgage loan modification yourself, or you simply don’t have the time to deal with it, then the next logical step is to hire someone to help you with this process. One place where you can look for help is non-profit loan modification organizations. Non-profit organizations, such as the Association of Community Organizations for Reform Now (ACORN), GreenPath, National Urban League, United Way, or Catholic Charities have offices all over the United States and are qualified to work with you and assist you with the mortgage loan modification process.

Another popular option for those who can’t deal with a mortgage loan modification themselves is to hire an attorney. Attorneys who specialize in mortgage loan modifications can offer you the proper guidance and discuss with your lender on your behalf. Hiring a professional is the best way of ensuring that the process goes smoothly and that everything will be handled with the utmost care and professionalism. If hiring an attorney is too expensive for the borrower, then contacting a local counseling service could be the next best option.

A third option when seeking help with your mortgage loan modification is to hire a mortgage modification company. Many times, these types of companies will overcharge you, often upfront, and provide no guarantees for something that you could easily do on your own. You have to remember that obtaining a mortgage loan modification is in your best interest, so hiring someone to give you advice is recommended, but hiring a company to do everything will probably not produce the same results, and it will cost more.

Needing assistance with your mortgage loan modification is nothing to be ashamed about. You are, after all, trying to save your home, so any bit of help matters. But before you go out and spend money on the services of a mortgage loan modification company, try to do a little research and find out if you won’t be better off doing things yourself. Receiving help from an attorney or someone who has experience with loan modifications, especially if you don’t have enough time to do everything yourself, is also a great way of making sure that you won’t have to go through a foreclosure and lose your home.

How These Alternatives Can Help You Avoid Foreclosure

How These Alternatives Can Help You Avoid Foreclosure- 150x150Going into foreclosure can happen for various reasons, such as money problems, divorce, or job loss, and it is never a pleasant experience. However, there are several alternatives that can help you avoid foreclosure, and they are generally considered a better substitute to losing your home.

What is Foreclosure?

Foreclosure happens when a borrower cannot make monthly payments on his or her mortgage loan anymore. This leads to the property being taken by the bank and sold.

Foreclosure involves several stages: after 3 to 6 months of missed mortgage payments, the lender notifies the borrower that he or she is facing foreclosure. This is done through a Notice of Default. A reinstatement period begins, in which the borrower has a chance to correct the default. If the borrower can’t correct the default, he or she will receive a Notice of Sale and the property is listed in a public auction. The winner of the auction will gain possession of the borrower’s property.

Alternatives to Foreclosure

Before you give up and accept that you are going to lose your home, you should know that there are alternatives to foreclosure. In order to determine what your best alternative is, you must discuss this with your lender. By contacting your lender as early as possible, you will have access to more options. Here are some of the alternatives to foreclosure that you could take advantage of:

  • Bankruptcy. Bankruptcy offers individuals the chance of a fresh start by forgiving debts that they are unable to pay, while giving lenders the chance to recover some of their losses through the debtor’s assets. Bankruptcy can become a very expensive process, and it’s recommended that you consult a professional before choosing this option.
  • Reinstatement. If you are able to repay the missed monthly payments, you could make your mortgage loan current, which will help you avoid foreclosure. This alternative is valuable if you use it early on, because you won’t have that many missed payments. Reinstatement can be very helpful if you are recovering from a short-term money problem, and can show the lender that you can repay what you owe and start making monthly payments on time. Be aware that you will most likely have to pay late charges and penalties.
  • Refinancing. Refinancing may be able to reduce your monthly payments by securing a lower interest rate than your current mortgage rate. You are required to be current on your monthly payments and have a fairly acceptable credit score in order to qualify for refinancing. You may also be able to qualify for refinancing through the Home Affordable Refinance Program (HARP).
  • Forbearance. When facing money problems, your lender is able to grant you a “forbearance,” meaning that your monthly payments will be put on hold for up to 6 months, giving you time to get back on your feet. In many cases, forbearance is combined with reinstatement, in order for you to pay the missed monthly payments on your loan, once your financial situation has improved. Forbearance may be extended for another 6 months in case you are unemployed.
  • Repayment plan. If you are a few months behind on your mortgage payments, you may also qualify for a repayment plan. The missed payments and late fees are combined with your regular monthly payments. However, you must be able to prove to your lender that you can afford to pay the past due amounts, and start making monthly payments on time.
  • Short sale. When selling your home through a short sale, the property is put up for sale, and sold for a price that is less than what you owe to your lender. After the sale is completed, you will have to negotiate with your lender to accept the sale price as payment in full. This option will still damage your credit, but, if you are successful in convincing the lender to accept it, you won’t owe anything anymore, unlike foreclosure.
  • Renting. While this option has nothing to do with your lender, you will need to rent the property for an amount that will cover your monthly mortgage loan payment.

Almost all of these options will affect your credit negatively, and are not ideal, but they are better alternatives than losing your home. But this doesn’t mean that you should just go ahead and pick one blindly, without knowing what it involves. Having knowledge about all of the alternatives that are available, how they work, and how they will impact you, is very important and should be thoroughly researched.