Your 5-bedroom house, which was worth $400,000, just sold for $222,000. You won't gain much, if anything, because the mortgage company is on your case. This kind of thing keeps happening. You don't want this to happen to you, so be sure you know what you're getting into when you refinance your home loan.
What's happening?
Several states, like Arizona, California, Florida, and Minneapolis, were affected by the foreclosure crisis. Read the news to find out what's going on in these areas and what it's like for the people who are losing their homes and money.
In many parts of the country that have been hit hard by the foreclosure crisis, foreclosed homes are being sold at auction. Eager buyers are buying them with a check for $5,000 as a down payment, and bids for a three-bedroom house began at $100,000. This is a nightmare for people who will lose their cheap homes. That's why you need to calm down when it comes time to close on your home loan refinance.
Play Smart
People put their homes at risk so they can pay off their credit card debts. Debt consolidation is a way to get out of having to pay more each month. They can get loans equal to or less than the value of their homes if they use their homes as collateral. At this time, don't take out a home loan refinancing loan for more than your home is worth.
You don't have to get cash out if you just want to refinance to borrow $45,000. Most mortgage officers are likely to say no to this request because it means they will get paid less. On a $325,000 refinance, they can get up to $3,000. They wouldn't waste their time on a second loan for a commission of $500 or less. They have to work just like everyone else.
But look at the rate of interest for cashing out. At the rate things are going, interest rates will be higher for cash out, so a home loan loan refinance will be cheaper. If you see that you're being pushed toward cash out instead of a second mortgage, don't give in. Think about what the cash out option will mean for your money.
Think before you jump.
Don't refinance your home loan just so you can go on vacation or buy a fancy car. The loan will help you pay down your debt. You should also read the contract to see if there are any fines or fees that could be put on you.
Find out if the interest rate is fixed or if it changes, and know the terms. If you think your monthly mortgage payment is affordable because you can still live comfortably on your monthly income without it, then the plan makes sense.
Having a second or third loan can be hard.
It's not easy to live with a mortgage. But if you have no choice but to refinance your home loan, stick to your budget until the loan is paid off. You'll be fine as long as you don't spend more than you have. You don't want to have to sell your beautiful home at auction next year.
