Refinance In Time

Mortgage-Refinance If you have a high-interest debt problem you need to change your lifestyle first. After you’ve committed to that, and only after, then refinancing may be in order.

By refinancing high-interest debt to a low interest mortgage or HELOC, “the resulting cash flow savings will serve you well IF you lose your job,” says mortgage advisor Greg Williamson.

If your job is on shaky ground, “Do this BEFORE you lose your job,” he says.  “How many banks do you think will renegotiate your debt when you don’t have a job?”

  1. If they found out and you cannot debt service the mortgage then you would jeopardize your mortgage approval. If you have a long closing and in the time frame you find a new job and you are off probation and credit, etc remains the same then you should be okay.

  2. I have a question on this too.
    If you have a good financial situation (including a good credit rating) and lose your job, will a renewal of an existing mortgage be a problem? What about a refinance to reduce payments (by making the amortization longer.)
    And can it affect an existing HELOC situation? (For example, could you use your HELOC to meet your payments on the traditional mortgage attached to the same house?)
    … I guess the fact that we even wonder about these things now are a sign of the times …

  3. Question-1–If you have a good financial situation (including a good credit rating) and lose your job, will a renewal of an existing mortgage be a problem? As long as your lender is still around ala Money Connect, GE Money and Accredited, etc, then if you have not missed a payment they will renew you, you may want to look around for a better rate though.
    #2–What about a refinance to reduce payments (by making the amortization longer.)IF you have no job probably a no go unless you were looking at a very low LTV.
    #3–And can it affect an existing HELOC situation? (For example, could you use your HELOC to meet your payments on the traditional mortgage attached to the same house?)You could maybe get away with this for a short time, but it will catch up to you, eventually it will have to be paid, robbing Peter to pay Paul is not a good idea.

  4. Refinancing is a sound investment strategy; however, it should not be used to curb your wild spending. If your using it to stop your spending, then chances are you will repeat the refinance in a few years.

  5. TopHomeMortgageLoan:
    Clearly, the only answer to a spending problem is to fix that problem first.
    However, I would like to hear Rob and Mel do an entry on what happens if you lose your job and (in these times) expect some delay in finding a new one. Both with renewals and refinancing an existing mortgage not about to expire.
    I have always assumed that refinancing at that point (to have a longer amortization and lower payments) would be a no-go (as Scruples mentioned), and so have structured my mortgages accordingly … but recently had a discussion with a friend where he does exactly the opposite. His logic is that being a good customer, his lender would be happy to refinance to a longer amortization to help preserve cash at a difficult time. I’ve always assumed that, especially with non-bank lenders, the lack of a job would be a deal breaker because the lender would be unable to fund the mortgage?

  6. Chris,
    If you lose your job-but continue to make payments–the mortgage holder will renewal as mentioned above assuming they are still in business–all they know is someone is paying the mortgage–i.e. don’t advertise to them that you lost your job unless you want them to not renew you.
    As for refinancing you would probably not be able to, unless as I mentioned you had like a 10% LTV, i.e. property worth $1 million and you want a mortgage of $100k and you have savings to pay the mortgage, etc.
    The advice your friend gave you is for lack of a better word b.s., maybe 40 years ago where a small town branch manager felt sorry for you, etc. this is 2009, not likely to happen now.

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