Mortgage refinancing is one of the most talked-about topics on the internet, and although there are a vast amount of websites discussing the topic, many seem to be able to provide very little information.

The reason for this is unfortunately that there is very little information to be had, because, on the whole, the financial institutions are in a big enough hole that they are only interested in refinancing by either charging and arm and a leg for the service, or taking only low risk customers. There is a vast pool of customers with bad credit in need of refinancing a mortgage, but still the banks and lenders are choosing to foreclose rather than provide a sensible alternative. Foreclosure rates are still at historic highs even after several failed government initiatives to slow the rate.

The issues facing those needing refinancing who have bad credit seem to be compounded every time a mortgage is refinanced. The odds are that you will have to a) find a sum to out into the property, b) pay an “arrangement fee,” and c) either pay more interest over a longer period or pay a higher interest rate over a shorter period.

This is all-but inescapable and many are choosing the foreclosure route as a possible way of walking away from the debt. Rules vary from country to country and state to state, so if this is a last option, be sure to make enquiries. Do not listen to anyone who says they have “help,” because these people are invariably scam artists and there are numerous scams that have grown up around this issue – mostly revolving around “renting your home back to own it,” which involve you signing over the property on the understanding that you can rent it back from the new owner and then buy it back when you are on your feet again. Usually this ends with the new “owner,” selling the home and taking any equity or allowing the bank to foreclose in the hope of then taking the equity. Do not do this.

The ongoing financial crisis means more and more are going to find themselves unemployed which will put more pressure on the bottom of the system, and more will find themselves unable to meet their mortgage payments. If you think about the vicious cycle this creates, the short term future does not look pretty for a lot of people needing refinancing with poor credit. The mortgage rates for refinancing will no doubt increase when the Fed loosens its grip on the current ridiculously low interest rate – which was never really passed on the end consumer in the first place

The situation in the UK is just as bad, with interest rates at historic lows, and the Bank of England being forced to print money. Although the base interest rate seems to have little relation to the mortgage rate for refinancing. The trick is for them to just print enough money to prevent the banks from collapsing. Any more and we are in severe danger of hyperinflation. A certain amount of inflation is a “good thing,” for the governments – inflate those debts away. If only it would trickle down to the average Joe in time. Not a hope in hell and I do not see the situation for those needing an adverse credit remortgage  improving any time soon, despite numerous headlines from the government press-release factories (newspapers).

Perhaps the most sensible option is indeed to walk away from these debts, when faced with the option of a crippling life-time long debt burden or starting over again.

Best case scenario anyone who does manage to refinance a mortgage in the current environment is going to need to find substantial equity to do so. Think around 30% of the value of the property. And this is no easy task at the moment, with unemployment on the rise, economies shrinking faster than analysts expected and still no end in sight to the credit squeeze. I have yet to hear one politician come up with a reasonable solution to the problem and this is leading me to believe that there is not one. They are just hoping that printing enough extra money will make it magically go away. I don’t see it myself – sooner or later we are going to have to face up to the issue and get a handle on it. Refinancing unmanageable debt with more debt – which may be an option for the government Inc, but not for us – is no sort of solution and can only end in financial disaster. Whether that happens this year, next year or the year after makes no difference and any short term fixes can only exacerbate the problem in the future. Which is the root cause of this problem. The housing bubble was created specifically to prop the system up after the dot com bubble burst.