February 26, 2008 10:47 ET

Refinance or Abandon

Leveraging Lower Interest Rates to Curb Foreclosures

DALLAS, TX--(Marketwire - February 26, 2008) - In spite of mortgage rates hovering around a 5-year low, thousands of troubled homeowners believe their only choice is to flee their home and face foreclosure. But with such inviting interest rates why are homeowners electing to surrender their property instead of simply refinancing?

"Many homeowners are experiencing mortgage anxiety and are really discouraged at this point," says Carrie Kelleher, chief operating officer of mortgage company "Foreclosing on your home or relinquishing your residence should not be your first choice, nor does it have to be in this market."

Experts say as rates come down a number of lending options become available and it is critical to find a lender who can council the homeowner through their options. Here are some questions Kelleher says homeowners should ask before making a decision:

1) Is there a financial advantage to refinance? In a market with reduced interest rates like we have today, many people who have closed a mortgage in the past five years will see an advantage of increased disposable income. Refinancing can provide one of the key weapons needed to fend off foreclosure: increased financial flexibility.

"The mortgage industry tosses around a number of litmus tests associated with refinancing such as a reduction of two percentage points off a homeowner's current loan, or minimum number of years in which they plan to stay in their house," says Kelleher. "These are certainly factors, but one shouldn't be swayed too much by the generic industry parameters, especially if the primary objective is to stave off foreclosure."

2) Can refinancing make a big enough impact to avoid foreclosure? The answer to this question must be measured against the homeowner's total debt. Home foreclosures are rarely only about mortgage debt, but more so about a person's ability to pay off their cumulative monthly bills. Refinancing can increase one's disposable income and provide the flexibility to better manage other debt. People often underestimate the cumulative value of incremental savings gained by refinancing their home.

3) What are the available refinancing options? Don't be afraid to ask. A lender should not only be viewed as an entity to provide refinancing loans. A good lender can also be leveraged as a resource to advise the homeowners about their options, explaining the pros and cons of refinancing and informing them of the processes associated with each of their choices.

"Be on the lookout for lenders who don't have the time or patience to walk you through your options and explain the value of refinancing," says Kelleher. "You wouldn't spend $50 at a restaurant with poor customer service, so why would you spend $250,000 dollars with a lending company who is only focused on their next deal?"

The decision of foreclosing is obviously not glamorous and can have many negative long-term implications to a homeowner's credit. For people who fear they may be close to foreclosure, they should contact a lender and see if refinancing might be the key to relieving some financial stress.

Learn more about lending options and check out money saving tools at:

Did you know? Reducing the interest rate 1 percent on a $250,000 home with a 30-year note has the potential to save the homeowner $55,000 over the life of the loan.

Contact Information

  • Media Contact:
    Amy Summers
    727-848-1618 ext. 202
    Email Contact
    Pitch Inc.