Question:

Is it possible to refinance to avoid foreclosure?

Answer:

Refinancing to avoid foreclosure is a well-tried method many borrowers rely upon as a last resource. However, though refinance to avoid foreclosure is quite effective and can often be used successfully, borrowers should not wait till the last minute to use it as a way out of financial difficulties.

How does refinance to avoid foreclosure works?

Even if you are behind with payments, you must have established enough equity to be able to borrow money against it. Some lenders are doing over-equity refinance (if state law allows it) so even if you have little equity on the house, you should be able to refinance with cash-out enough to cover for the missed old mortgage payments.

Be aware if you try to sell your house on your own. A refinance with some cash-out is almost a 100% sure way to avoid foreclosure and even though selling the house you may end up with a bag of cash, the possibility that you will not be able to sell it to cover your mortgage obligations is high, if market is declining.

Another successful, even proactive, way to avoid foreclosure is signing a life term insurance policy. Compared to refinance to avoid foreclosure, this is a much better way to act preemptively without little or none additional costs. A life term insurance policy may pay mortgage payments for you if you suddenly suffer a sudden shrink of income due to insurance event and won't cost more, and may even cost less than a regular mortgage insurance. If you have a life term insurance, you may never have to think of refinance to avoid foreclosure.

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