Explore Mortgage Refinancing Options Before Selling Under Pressure

By Richard Barrington
LoanPage.com Columnist

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If you are having trouble keeping up with your mortgage payments, you may think that selling your home and using the proceeds to pay off the remaining mortgage balance is inevitable--the lesser of two evils when compared with defaulting on the mortgage. Before you do this make sure you've fully explored a third alternative.

Refinancing your mortgage to restructure your debt might save you from the unpleasant choice of selling under pressure or defaulting.

Selling Under Pressure Will Cost You

Under any circumstances, selling under pressure will cost you bargaining power, but that is especially true at the moment.

Home prices are declining as existing home sales have reached the slowest pace in four years. Downward pressure on prices can be expected to continue, as the inventory of homes on the market has now reached the highest level in fifteen years, and mortgage rates have been rising.

In other words, selling under these conditions may mean trading one financial problem for another.

Refinancing Can Mean Restructuring

With mortgage rates having risen recently, it may seem natural to think there is no point in refinancing. However, there can be other reasons to refinance.

Besides obtaining a cheaper mortgage rate, refinancing can also be an opportunity to restructure your debt. The best example is spreading the remaining balance out over a longer period to lower the monthly payments. Even mortgages with "balloon" features, such as interest-only mortgages, may be an option. These approaches will cost you more in the long run, but if you are just trying to get through an immediate cash flow problem, refinancing to restructure your debt may be the right solution. Certainly, it is worth exploring before you give in and sell under adverse circumstances.

Associated Press

About the Author
Richard Barrington is a freelance writer and novelist who previously spent over twenty years as an investment industry executive.

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