It will likely be impossible for you refinance your mortgage as long as you are delinquent on your HELOC, especially if you are facing foreclosure because you have not made payments on the HELOC for several years. The one lender who may be willing to work with you is your HELOC lender if you can demonstrate that refinancing will make them whole by enabling you to pay off the HELOC loan balance including any past due payments and late fees. Although this option is unlikely, it does not hurt to have a conversation with your HELOC lender to understand your options.
If you cannot refinance through a traditional lender, assuming you have sufficient equity in your home, your best approach may be to work with a private money lender to refinance the HELOC only and then refinance both your first mortgage and the private money loan with a standard mortgage, such as an FHA loan, after you have made six-to-twelve months of on-time payments. If you do apply for a private money loan be sure to fully understand the higher interest rate, costs and fees, including any pre-payment penalty, charged by the private money lender.
We provide a comprehensive overview of private money mortgages as well as Six Things You Should Know About a Private Money Mortgage on FREEandCLEAR. You can also use our FREEandCLEAR Lender Directory to search for lenders by state, lender type and loan program. For example, you can search for private money lenders in your state or you can search for traditional lenders that offer mortgage programs for credit-challenged borrowers.
I also recommend that you contact multiple lenders to understand how they would handle your unique situation as well as how long you have to wait after you bring your HELOC current before you can apply to refinance your mortgage. Be sure to contact FHA lenders as the waiting period following delinquencies for an FHA mortgage may be shorter than for other programs. You can review FHA lenders in your area by clicking FHA mortgage RATES We advise you to contact at least four lenders as qualification guidelines vary. Plus, shopping lenders is the best way to save money on your mortgage.