Home Refinance With Bad Credit
People do a home refinance with bad credit for a variety of reasons: to get a lower interest rate, change of terms, more manageable monthly payments, debt consolidation, etc.…
Although it has become increasingly harder for a homeowner with a negative credit history to do a home refinance with bad credit, there are still lenders catering to this market that may be willing to give you the opportunity you’re looking for.
They are much harder to locate these days because companies and banks have lost tons of money dealing with subprime mortgage loans and many companies have shied away from this field – so now the window of opportunity it getting slimmer & slimmer to refinance with bad credit… BUT — it is not totally shut down.
Shop around, compare and do your research for mortgage refinancing with bad credit — if everything checks out be prepared, organized and ready to ‘seal the deal’ while the opportunity is on the table.
Refinance with Bad Credit – A Few Things To Know:
Your Current Credit Standing
First & foremost, if your credit has not improved a bit since your last home loan, then it’s probably not the best idea for you to even think about refinancing at this time.
You might want to strongly hold off until you can make some significant improvements to your credit profile; otherwise, you may just land yourself in more hot water with a home loan that is no better (or even worse) than you currently have.
You can still shop around, but chances are slim that you’ll find anything better than what you currently have.
If you decide to do a home refinance then consider this: How much equity do you have in your home? The amount should at least be enough to cover closing costs of your loan and pay off any personal debts you wish to roll into your loan. The more equity you have in your home, the higher your chances to refinance with Bad Credit.
If you’re fortunate enough to find a promising loan offer with a legitimate lender, then your LTV will surely play a factor in the amount of your loan. Basically, the loan you seek cannot be greater than the value of your home.
With bad credit, depending on how bad, expect to receive a Home Refinance Loan that is between 60 – 80% of the value of your home. And keep this in mind: The higher your Loan-to-Value, the higher the risk it is for lenders, which in turn will likely make the interest rates higher for you. (Ex. If your home is worth $100,000 and you get a loan for 75,000, then your LTV is 75% — leaving $25,000 equity in your home.
A major advantage of mortgage refinancing with bad credit is that you are allowed to roll outside personal debt into your new mortgage loan i.e., credit cards, student loans, judgments, etc. Since mortgage interest qualify as tax deductible, this one benefit alone could save you a great deal of money.
Fixed Rates vs. Adjustable
If you currently have an adjustable rate mortgage that fluctuates up & down and possibly out of control%#@! — Then it would be good to consider locking into a fixed rate. This will make your monthly payments steady and consistent and you won’t run the risk of having your payments balloon OUT like with an ARM – Adjustable Rate Mortgage.
BEWARE! Adjustable rate mortgages can come in the disguise of teaser rates i.e. low intro rates too good to last. They may look fantabulous at first site but years into the mortgage they can ballOOON out of control, causing you to be unable to handle your payments – and possible run the risk of losing your home.
If at all possible Stay Away from ARMs is our advice (or at least be fully aware and prepared to handle them). This is the primary reason why so many people have lost their homes in recent years with the sub-prime mortgage meltdown.
Quite possibly, with a Home Refinance with Bad Credit, you’ll need to pay a down payment based on the percentage of your loan. This issue varies depending on the lender. A sizable down payment of between 20% to 30% can greatly reduce your risk level from the lenders point-of-view. The more you put down up front should result in lower interest and payments.