I Can’t Pay My Mortgage: Should I Refinance?

Refinancing is often presented as a great option for homeowners, even if they’re not having trouble making mortgage payments. And, in some cases, it’s a good financial move. But, there are downsides, as well. And, those downsides may be of particular concern to someone who is considering refinancing because they can’t keep up with mortgage payments. For example, refinancing could mean paying origination fees, a higher interest rate, or a longer loan term that results in paying more interest over the life of the loan. 

How Can Refinancing Help Get Mortgage Payments Back on Track? 

The key ways refinancing could help you better manage mortgage payments moving forward include: 

• Rolling in past-due amounts so you can start fresh with a single monthly payment you can make on time
• Lowering your monthly mortgage payments

Catching Up Past-Due Payments by Refinancing

Refinancing may look like a good option if you’ve fallen behind on your mortgage payments and can’t get caught up, even though you have enough income to make your regular monthly payments. But, there are pitfalls.

The first stems directly from the fact that you’re behind on your mortgage payments. If the delinquency is significant enough that you’re considering a refinance to catch up, chances are that delinquency has already impacted your credit score. 

That means you may have trouble refinancing. And, if you are able to refinance, you may pay higher fees and interest–the interest rate you’re offered might be even higher than your current rate. Sometimes, homeowners face this problem even before falling behind on their mortgage loans, simply because interest rates change over time. For example, in September of 2026 the average interest rate for a 30-year mortgage loan is about 6.95%. That’s nearly double the average rate for the same loan in September of 2016. In this situation, other options might be more beneficial.

For example, you might look into pursuing a modification of your current mortgage loan, or consider Chapter 13 bankruptcy. In Chapter 13, homeowners can often catch up past-due mortgage balances over three to five years, with no risk of foreclosure based on that past-due balance. 

Lowering Monthly Mortgage Payments

A refinance can lower your mortgage payments in two ways: by lowering your interest rate, or by stretching out your payments over a longer period of time. Making a good decision about refinancing to lower your monthly requirements means gathering information about the rates available to you and associated fees and then crunching numbers. It’s important to look at more than just the monthly payment. 

Consider these two scenarios. 

Refinancing a Recent Purchase with a Good Interest Rate

Bob bought a home in Los Angeles County in 2020. He had a large down payment from the sale of a prior home and financed $325,000 over 15 years at a 3% interest rate. 

In September of 2026, he was having trouble making mortgage payments and wanted to find out whether refinancing would be a good option for him. By that time, mortgage interest rates had increased significantly, and the best deal Bob could get was a 6.3% interest rate. But, he’d be stretching out payments across 15 years instead of the nine years remaining on his current mortgage, so his monthly payments would drop somewhat.

The refinance would lower Bob’s monthly payment by a little over $400, from about $2,244/month to about $1,825/month. 

An expert tip from Barry

Bob will pay a hefty price for that drop in monthly payments. The total remaining payments on his original loan add up to about $242,352. That’s the remaining balance of about $212,197 on the house, plus just under $30,000 in interest. 

With the new 15-year loan, remaining payments would total $328,500. Not only would Bob be making payments for six years longer, but his total cost would increase by more than $86,000. 

Refinancing an Older Purchase with a High Interest Rate

Ilsa bought a home in Orange County in 2000 with a small down payment and financed $325,000 over 30 years. Since she took out her original mortgage loan in 2000, her rate was high: 8%. She made mortgage payments of about $2,385/month for 22 years, until she experienced an unexpected drop in income. 

She looked into refinancing and discovered that current interest rates are lower. However, her credit has suffered a little since the drop in income, so the best rate she can qualify for was 7%. 

Her outstanding loan balance was about $168,000, since high interest had eaten up much of the $629,000+ she had already paid toward her loan. She learned that if she refinanced for 30 years at 7%, her monthly payments would drop to about $1,118/month. That’s a dramatic difference that would allow Ilsa to manage her monthly mortgage payments easily. 

But, it comes at a cost. Ilsa had just eight years of payments left, and she’s considering taking on a new 30-year mortgage. Her total payments across the new loan would be about $402,480 compared with about $229,000 if she were able to continue paying on her current loan. 

In Ilsa’s situation, it may be worth paying the additional interest to dramatically lower her monthly payments and keep her house. But, she may have another option that could serve her better: refinancing at 6% for 15 years would lower her monthly payments to about $1,418/month–higher than the payments on a new 30-year loan, but still a savings of more than $900/month compared with her current mortgage. She would be extending her loan by seven years instead of 22, and her total payments would add up to about $27,000 more than her current loan. That’s a savings of nearly $150,000 compared with the new 30-year loan. 

As you can see, the wisdom of refinancing varies significantly depending on issues like your current interest rate, the interest rate available, your outstanding balance, and how long you have left to pay on your loan. It’s critical that you dig in deep and make sure you understand all of the costs and benefits before making a decision.