
Do you need to refinance to stop foreclosure? While there are indeed some lenders who will refinance a mortgage to help the homeowner avoid foreclosure, if you are far into the foreclosure process you will have a difficult time finding a legitimate lender willing to refinance your home loan.
Stopping Foreclosure
Lenders initiate foreclosure when a homeowner does not make mortgage payments on time. While some lenders attempt to work with homeowners to find a solution, not all instances of initiated foreclosures end in a refinance or modification and many people do lose their homes.
Examples of options struggling homeowners can explore with willing lenders include:
- A one-time skip payment to allow homeowners to catch up on finances
- Mortgage loan modification or restructuring
- Mortgage refinance
A mortgage refinance is a completely new loan and can be acquired either through the existing lender or through a different mortgage lender. Refinancing a mortgage loan results in new closing costs, but can be a good option for people who need to lower their monthly payment because of an unexpected change in income or financial situation.
Finding a lender who is willing to refinance a mortgage before the homeowner falls behind in payments can be relatively easy if the homeowner still has a good credit score and the financial means to make monthly payments under the new loan terms, but obtaining a refinance after already having fallen behind in mortgage payments or having experienced a significant drop in income becomes much more difficult.
The Need to Refinance to Stop Foreclosure
Refinancing a loan can stop a foreclosure. Even if the mortgage payments have fallen behind, foreclosure proceedings can be stopped if another loan pays off the delinquent loan. Foreclosure laws vary from state to state, so homeowners who have fallen behind in their payments should not assume that they can refinance a loan right before losing their home to foreclosure because this may not be the case.
Caution
Having a home in the various stages of foreclosure can be a scary time and unfortunately some crooks try to capitalize on homeowners' anxiety by offering quick fixes that are not actually fixes at all. Some people wind up signing their homes over to "lenders" who promise to fix the problem but what actually happens is the title of the home gets signed over but the debt does not go away.
Use caution if you need to refinance to stop foreclosure, and try to be as proactive as possible when you do make the decision to look into a refinance. Your chances of refinancing with a legitimate lender are better when your existing mortgage loan is still in good standing.
Lenders

Your existing lender is the best place to start when trying to refinance your home as a result of financial difficulties because your lender may have additional options for you that can streamline the process. On the other hand, keep in mind that your current lender may not offer the best interest rates or terms for a refinance, so it is worth it to do some comparison shopping.
Your options will become drastically limited if you are already a payment or more behind in your existing mortgage or if you have fallen behind in other bills that will show up on your credit report, making you a less creditworthy applicant. The amount of equity you have in your home may also have an effect on your chances for refinance; the more equity you have in your home, the more likely a lender will be to approve a refinance.
Additionally, if your current mortgage is insured through FHA or the VA, contact the organization to find out if there are assistance programs that can help you refinance your loan before the foreclosure becomes finalized. Most lenders and guaranteeing agencies want to avoid foreclosure if possible because it can be a costly process for them as well as for the homeowner.