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There are few things scarier than losing your home and seeing your family on the street. Unfortunately many Americans and people worldwide are facing this problem due to the worldwide crisis. As we know most governments are doing their best to protect poor families that are at risk of losing their home because they are unable to meet the mortgage payments. One of the measures the American government has provided is the HOPE program.  This program began under the Bush administration and the current administration has just expanded the availability and extent of the mortgage protection program for families.
Sadly many families don’t understand or know about the program and how they can benefit, if you fit this profile what can you do make the most of the helping hand the government is trying to provide. Information is as usual the most powerful weapon whether you are trying to fight a war or pay your home loan. If you are having trouble paying your mortgage and need aid to avoid foreclosure you need to get working on solving your situation.
1)    Find out what your situation is exactly. This means working out how in debt you are, what your interest rate on each loan is, what your prepayment penalty is on your current mortgage and compare it with your current income. You would do well to get all the paperwork you are going to need together. Contact your mortgage provider and ask for an up-to-date review of your mortgage and the details of the contract.

2)    Once you know how bad things are you can start making productive steps towards solving the situation. For instance you should get a feel for the value of your home and compare the current value with the outstanding principal on your mortgage. Once you have this information you should contact your lender. You should contact your lender before you are behind in your payments; this will show you are acting in good faith and want to solve the situation. Lenders can often provide breaks and good re-financing deals to customers that make the “right” decision. If your lender will not work with you, you might need to look to other lenders before your credit rating starts to suffer.

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 The perfect plan for refinancing your mortgage

You have thought about it but never taken the plunge. You have been told it is risky, or maybe you are simply scared of making a financial mistake that could cost you more than you can afford to lose. 
All these are good reasons to think twice about refinancing your mortgage and although this article is by no means selling the idea of refinancing your mortgage it will provide some reasons why refinancing your mortgage can be a good idea.

Let’s start with the basics. What is a mortgage?
A mortgage is a loan where the security is your home. In other words if you don’t pay the loan and the interest on your loan you lose your house which is sold to cover the principal (pending amount) of your loan. What is important here is that all mortgages are the same, the only thing that matters is the interest rate you pay and some basic conditions like what penalty must be paid if you pay back your mortgage early. Apart from those basic conditions it doesn’t matter if you get a loan with the biggest bank in the world or your next door neighbor. What does this mean for you and me?

It means that if you have the opportunity of switching your mortgage with another supplier or with the same supplier at a lower interest rate it is probably a mighty good idea. Unfortunately many people don’t actually understand what refinancing a mortgage actually means. A bank or lending institution that is offering to refinance your mortgage at a lower interest rate is basically offering to buy your house off the bank that holds your mortgage (at least the percentage they own) and sell it back to you for less than you were paying for it before. Why would a bank want to do that? Well they are actually investing in the promise that you will pay your mortgage and are willing to accept a lower rate of return than your old bank or mortgage provider was when you first signed your mortgage. This is often because the going rate of interest has dropped and everyone is willing to invest money for a lower return.

There is however another way of refinancing your mortgage. Some banks or financial institutions will offer to increase the principal on your mortgage or increase the time you have to pay for it while keeping the interest the same or even increase it. This is becoming rather popular recently because people are struggling to pay for their mortgages at the current interest rates.

Lets explain this a little better. There are three main ways or reasons to refinance your mortgage:

1) You need more cash and refinance your mortgage so that your bank or a new bank gives you more cash with your home as security.
2) You want to pay less every month because you are struggling to meet your monthly expenses so you lengthen the tenure (the length in months or years of the mortgage), this reduces your monthly expenses but increases the interest you pay for the money you borrowed and therefore makes your mortgage more expensive although more affordable if you depend on a monthly income.
3) You simply refinance the same mortgage at a lower interest, reducing the cost of the mortgage.

These three types can be combined with each other in a variety of ways. For instance some smart people refinance their mortgage at a lower interest and reduce the tenure of the mortgage. This way they reduce the overall cost of the mortgage while keeping their monthly expenses similar.

What are the risks? This is where the perfect plan comes in.

The risk with refinancing your mortgage is that you will be tempted to borrow more money making your mortgage unaffordable causing you to default on payments and lose your home. The perfect plan is to not borrow more money but reduce the cost of your mortgage by shortening the tenure, lowering your interest or both.  Of course your circumstances might be that you really need the extra cash and that this is the main reason you are looking for a mortgage.
However as far as it is feasible be smart, don’t fall into the trap of ever growing mortgages and take control of your debt.

Related posts:

1. Do’s and don’ts of mortgage refinancing.
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2. Mortgage Refinancing For Underwater Borrowers Now Available
3. Home Loan Refinancing Anti-Foreclosure Effort Results Disclosed