man considering refinancing his mortgage


Considering a Refinance to avoid mortgage arrears is a proactive and responsible financial strategy. Falling into arrears (missing payments) on your mortgage can have serious consequences, including damage to your credit score, risk of foreclosure and can potentially cause you to be even more trapped into the current debt situation with little options.

Refinancing before arrears can help you address this situation in several ways:

  1. Lower Monthly Payments: If you’re struggling to make your current monthly mortgage payments and meeting other financial commitments, refinancing to secure a lower interest rate or extending the loan term can reduce your monthly payment burden. Lower payments can make it easier to stay current on your mortgage and avoid arrears.
  2. Consolidating Debts: If you’re at risk of falling behind on your mortgage due to other high-interest debts, a cash-out refinance can allow you to consolidate those debts into your mortgage. By rolling your high-interest debts into a lower-interest mortgage, you can lower your overall monthly debt obligations and reduce the risk of arrears.
  3. Extending your Loan Term: Extending the term of your mortgage through refinancing can significantly reduce your monthly payments. While this may mean paying more interest over the life of the loan, it can provide short-term relief if you’re struggling financially and want to avoid arrears.  When you become more financially comfortable you can always pay extra to reduce faster.
  4. Negotiate with current lender for lower rate or Interest Only: In some cases, lenders may offer a reduced interest rate to retain your business, They commonly will not do this if you are in arrears.  They generally want to help homeowners avoid arrears. Another variation is you may be able to secure an interest only term for a period.
  5. Pay what you can as much as you can – Don’t ignore the problem  If you are financially struggling the most important debt to pay is the mortgage.  If you miss payments on smaller unsecured loans or debts this is not seen as bad as missed home loan repayments when it comes time to refinance your home loan even with Bad Credit.  So, rule number one – try to always make mortgage repayments. If you are paying less than the minimum, it will be seen as making an effort and your broker or a lender can see this and potentially be more willing to take a chance to help out.  As long as a refinance is your best interest financially.
  6. Fixed Rate Mortgages: If you have a variable rate mortgage and are concerned about rates rising even further causing unaffordable payments, obtaining a comparison for refinancing into a fixed-rate mortgage can provide stability. Fixed-rate mortgages have predictable monthly payments, which can help you avoid arrears caused by interest rate increases.  However currently the fixed rate mortgage on offer may not be more affordable.
  7.  When refinancing to avoid falling into arrears and having bad credit or a poor credit score, it’s crucial to carefully evaluate your financial situation and your ability to sustain the new mortgage terms.
  8. It is recommended to use the services of a Mortgage Broker especially one who has experience in reviewing the overall situation and one who understands the end goal. Mortgage brokers have access to way more lenders and their credit criteria to reduce any risk of you being Declined by the Bank.

Remember that refinancing is not always a guaranteed solution, and it may not be available to everyone, depending on your credit score, income, equity and other factors. But, acting early and exploring your options before you fall into arrears is generally a wise approach to managing your finances.


Plan Ahead and chat with a WhiteStar Broker early.  Contact us today.