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Refinancing Your Home Pros and Cons

Foreclosure is a word that no one wants to hear, but there are several things that a homeowner can do to forestall this legal proceeding or to stop it from happening altogether.  The best way to stop a foreclosure is to pay what you owe and keep your payments current.  If your payments are simply too high to be able to make consistently, you may want to consider the pros and cons of refinancing your home as a measure to stop foreclosure. 


It is important to understand that when you are dealing with a possible foreclosure proceeding that it really doesn't take as long as many people seem to think it does.  If you are under the misconception that a foreclosure is always a long and drawn-out procedure, then you will change your mind once you understand that the lender can begin foreclosure proceedings as soon as you have missed one payment.  Your house can be sold at an auction and a Notice of Default can be filed as quickly as 180 days from the date of the first missed payment.  If you know you are having some financial difficulties, you will want to begin the process for a mortgage refinance before you miss a payment, if possible. 


This is one of the negatives to refinancing a home to avoid foreclosure because your time is so short that you may have trouble getting the mortgage refinance done in time to help you out.  Another negative is that you may be stuck with a higher interest rate if your credit score is below 720.  If you have missed payments to some of your other creditors because you were trying to keep up on the house payment, your credit score may have taken some hits.  You may find that you need to get a bad credit mortgage loan when you refinance your house because of your credit score. 


Another factor that is both a pro and a con is that if you have been in your home for 10 years and only have 20 to go on your current loan, you may have to do a mortgage refinance on a 30 year loan to get the lowered payment you need.  This means that you have effectively added ten more years to the term of your loan.  On the flip side, going for a full 30 year loan means that your payments will definitely be lower and you ought to be able to handle them better. 


As you can see, mortgage refinancing can be a good way to avoid foreclosure.