New York homeowners have several options for dealing with underwater mortgages and deteriorating household finance situations: modifications, deed in lieu of foreclosure agreements, bankruptcy, and short sales.
The easier option may be refinancing, sometimes called “refis,” which just means taking on a new loan to repay on better terms to repay the terms of the original one. There are several benefits and a few drawbacks to refinancing in New York.
As to the benefits, refinancing avoids default because the new mortgage will have more favorable terms than the old one, namely lower monthly payments and fixed interest rates. The better terms usually lower monthly payments, which decreases the likelihood of default. Refinancing also has minimal effects on homeowners’ credit ratings, which is something that can’t be said for deed in lieu agreements and short sales. This is helpful for homeowners who desire further access to credit.
Refinancing can still help those who have second mortgages. Contrary to what one might think, second mortgagees don’t necessarily object to refinancing primary mortgages. It increases the likelihood that the homeowners won’t default on the second mortgages. Consequently, they often give permission to homeowners to refinance primary mortgages. Finally, the federal government’s Home Affoardable Refinance Program (HARP) facilitates refinancing plans of up to 125% of a house’s value. HARP loans also help those who have little or no equity in their homes and wish to avoid paying high amounts for mortgage insurance.
There are fewer drawbacks to refinancing, but they can be significant. First, if you lose income then you’ll be no better off than before. Second, and related, if your home was underwater after the refinance and you must move for some reason, then you will have to take more significant measures such as a short sale or bankruptcy.
Refinancing a mortgage can help many homeowners, but it’s not for everyone and people should consider all their options when they encounter debt problems.
For more questions about mortgage problems, refinancing, bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced New York bankruptcy attorney Bruce Weiner for a free initial consultation.
