The best and as a matter of fact, the only real solution is for a person who has lost his job as well as looking to negotiate a much lower mortgage rate, would actually be a loan modification.
As the name implies, it means that you renegotiate your loan. Usually, refinance mortgage loans are taken out by people who wish to tap into the equity they have built up by paying down the principal on their mortgage. For this reason, refinance mortgage loans are also sometimes referred to as home equity loans.
Here is an example of the ideal refinancing situation: Mr. Save received a 30-year loan for $100,000 at an 8% interest rate. After a few years, Mr. Save refinances his home, now receiving a loan with a 6% interest rate. That means that he is now saving about $130 a month. Multiply that over the course of 30 years and he has just saved himself from paying roughly an extra $48,000. Imagine all that you could do with that kind of money. It could end your financial struggles. Who wouldn't want that? But, remember, that was the ideal situation.
It is always better to avoid any major purchases prior to applying for a home mortgage refinance loans with a bad credit since only serves to add to your revolving credit and decreases your credit scores. Only after you avail a home refinance loan should you attempt to spend any significant amount of money. It is pertinent for you to know that there has to be awareness about credit reporting agencies if you have just inherited a fortune. This is particularly important as credit agencies are not conscious of your newly acquired
Lowering your monthly interest rate can free up significant amounts of cash every month over the life of your loan. When you're talking about a loan that lasts 30 years – and sometimes more – or even a shorter loan of 15 years, small differences turn into large cash amounts. By lowering your mortgage payment, you also have extra money to pay off other loans with higher interest rates, or start an emergency savings fund to ward off the budgetary panic that can occur in the face of unexpected expenses.
To get the whole picture, lenders will look at your monthly income and how much money of your monthly income goes to the monthly payment after deducting your payments from other loans. If your total debt exceeds the limit of 38 per cent of your monthly wage, you are deemed a poor risk.
There is a typical rule of thumb when it comes to refinancing a mortgage which is that you should not refinance unless the interest rate of your new home loan is 2% less or lower than the interest rate on your current home loan. Depending on your situation you may or may not need to use this basic rule to make your decision.