Some people find my blog by searching “What to do when you can’t refinance?”
My previous commentary, “What Should You Do About Your Rising Mortgage Payments?” and What is Your Obligation to Your Lender?, both of which have drawn some criticism, to which I’ve tried to reply (e.g., here).
I’m no financial advisor, but I have an idea of what to do. It depends on whether you can afford your mortgage or not.
If you can still afford your mortgage, keep making the payments. Make cutbacks elsewhere. Buy generic brand groceries. Run your heat/AC less.
If you absolutley cannot afford them (e.g., a mortgagor became unemployed) then by all means, first try to negotiate some sort of refinancing. If that doesn’t work, stop making any payments! Don’t make partial payments if this is a long-term or potentially long-term problem. This will only exacerbate your pain and suffering. You’re going to lose the house and destroy your credit, anyways. Don’t give up any more cash; you’ll need it to make a security deposit on the next apartment or house that you rent.
You should at least be able to get in to a decent apartment. But don’t splurge on this. If your bachelor lifestyle is accustomed to two bedrooms for all of your trinkets and man-toys like playstations and guitars, get a cheaper one bedroom, and economize, for christ’s sake! Then, gut it out. Work hard, weather the storm, and in a few years this trouble will all be behind you.
Then again, understanding time preference, and acting in accordance with its principles and your financial wherewithal is probably what got you into the mess, to begin with!