This is an extremely popular question right now.
It is also a very broad question. There are numerous variables I would need to know before giving you a specific answer. But there is some general advice I can give.
The short answer is that you probably need to refinance your mortgage.
First of all, the great news is that mortgage rates are near an all time low. So the interest rate will not be the most difficult aspect of refinancing.
Of much more concern is the current value of your home combined with the stricter lending guidelines that are now in place as a result of the current state of the mortgage market.
Depending on where you are located, your home might not be worth what it was when you originally bought it. On the other hand, you might have obtained a loan from a lender who is no longer in business who gave you a loan with unrealistically easy guidelines. If these guidelines are no longer available or if your home value cannot support the refinance, then your options become much more limited.
Option 1: Sell your home.
If you sell your home, you might not be able to get what you paid for it, which would result in a short sale.
If you decide to stay in your home, there are only a couple things you can do.
Option 2: Allow your rate to adjust and see if you can afford the payment. In most cases, this is not feasible, and your rate can continue to go higher. Better plan is option 3.
Option 3: Talk to your lender and find out what kinds of renegotiations they are willing to do on your loan. You are definitely not the only one in the country in this situation, so lenders are starting to come up with creative ways to modify your loan so you can afford to stay with them. After all, it will cost them a lot of money if you end up going into foreclosure.
First thing’s first. Find out if you qualify. Have a professional analyze your situation. If you cannot refinance, you’ll have to consider negotiating with the bank or looking into short sale. Otherwise, you are facing the possibility of losing your home and damaging your credit severely.