Refinance your mortgage and reduce debt

You should consider refinancing your existing debts, especially if you have a lot of equity in your home, to pay off current debts and arrears. Your goal is to get a new debt with cheaper monthly payments. Your current mortgage lender probably won’t let you refinance due to problems you’ve had with your current mortgage, but you may be able to find another lender who is willing to negotiate with you. In general, loan officers earn money based on the amount of new debt they write.

Generally speaking, refinancing isn’t necessarily a good idea if there isn’t enough equity in your home. In fact, you won’t find a lender who can give you new debt if there isn’t enough equity. If you want to refinance and you are retired or very close to retirement, you should avoid taking on new debt with a payment term of 15 or 30 years. Having to make so many mortgage payments over the years or decades can put a strain on your finances; it could even cause you to delay retirement or look for a new job even though you’ve already retired. If you have manageable debt on your home, it’s best to refinance it into a shorter-term loan (perhaps five years), if you can afford the payments.

When considering refinancing, be very careful about the terms you want to agree to. Check all the fine print in the loan agreement. Be on the lookout for interest rates that can start very low and then gradually increase. Also, be careful with interest-only mortgages; Payments that may seem affordable in the interest-only period can skyrocket when you start paying principal and interest. At that time, you must compensate for these first years when you have not yet paid the principal.

If your financial situation is so bad that you can’t get a traditional lender to refinance your mortgage, you should consider working with the hard money investor. You are a legitimate investor who agrees to make loans that ordinary lenders consider too risky.