One of the most common options for dealing with a deteriorating mortgage condition in Las Vegas is refinancing it.
“Refis,” as they’re called, are more conventional than, say, paying until you hope to secure new income to avoid a default, short selling, offering the bank the deed in lieu of foreclosure, discharging secondary loans if possible, or strategically defaulting on the loan. Refinancing simply means the borrower takes on new debt to pay off an old debt.
There are six benefits and two drawbacks to refinancing that many borrowers may not be considering.
(1) Avoiding default. The refinanced loan contains more favorable terms to accommodate the borrower’s current circumstances, which means that people who are about to fall behind on their mortgages are less likely to default if their monthly payments are lowered in exchange for a longer term.
(2) Fixed interest rates. Frequently, people who refinance originally chose adjustable rate mortgages and the rates have since jumped. Most refis allow the borrower to switch to a fixed rate mortgage to reduce exposure to adverse market forces.
(3) Relief for an underwater house. If the balance on the primary mortgage is greater than the house’s value, refinancing can make it easier for the homeowner to rebuild equity.
(4) Minimal effect on your credit rating. Homeowners are often sensitive to a financial move’s affect on their credit scores. There are more important things in life, but to those who care about accessing future credit lines refinancing is a reasonable option.
(5) No prejudice to second mortgage holders. Many people believe that the owner of a second mortgage will object to a homeowner refinancing the first. This often is not the case because a refinanced first mortgage improves the likelihood the subsequent holders will get paid. Thus, they will often give permission to homeowners to refinance.
(6) Government support. The federal government’s Home Affordable Refinance Program (HARP) facilitates refis of up to 125% of a house’s value, including situations where homeowners have little equity and wish to avoid high mortgage insurance charges.
Refinancing brings two drawbacks to homeowners.
(1) If your income drops and you can’t make the payments, you will be no better off.
(2) If you lost all your equity, and despite the refi you haven’t turned your mortgage right side up, and you need to move for some reason, you will have to change your plan.
Making mortgage payments are a serious problem for homeowners in Las Vegas, but refinancing can help. Another option worth considering is bankruptcy, and experienced Las Vegas bankruptcy attorneys are here available to help you.
For more questions about bankruptcy in Las Vegas, please feel free to contact an experienced Haines & Krieger Las Vegas bankruptcy attorney for a free initial consultation by calling 702-880-5554.