The average American homeowner refinances their mortgage every four years. Why not just get a mortgage and stick with it like your parents did you ask? Homeowners are finding that as their financial situations change due to higher incomes and better credit, doors are opening to them that may have been closed before. This is especially true for homeowners with poor credit. Here is how you can use your mortgage to rebuild credit, consolidate debt, and get yourself back on track with your finances.
Mortgage Refinancing 101
When you refinance your existing mortgage you are simply taking out a new mortgage to pay off your old loan. The process is nearly identical to what you went through to get your original mortgage, including many of the costs. There are a number of good reasons for refinancing your mortgage, not just to lower your interest rate and payment amount.
If you have poor credit, you can use the equity in your home to rebuild your credit by consolidating your high interest debt into your mortgage. You can accomplish this by taking cash back; this means you are borrowing more than you owe on your existing loan with the new mortgage. Once you close on the loan you will get the excess back in cash to pay off your bills. By paying off your existing debt and focusing on paying all of your bills on time you will be on track to rebuild your credit in as little as two years.
How to Refinance with Poor Credit
Refinancing your mortgage with poor credit is more difficult; however, if you do your homework and research lenders you can find competitive offers for your new mortgage. Your goal for refinancing is to rebuild your credit, if you have to accept a slightly higher interest rate or less than desirable terms you will be able to refinance with a traditional mortgage lender once your credit has improved. You only need to keep the bad credit loan for two years. Two years is enough time to significantly improve your credit score if you use credit responsibly and pay all of your bills on time.
You can learn more about your mortgage options and rebuilding your credit by registering for a free mortgage guidebook.
By: Louie Latour
Posts Tagged ‘Existing Mortgage’
Bad Credit Mortgage Refinance: You Can Find Good Refinancing Deals in any Economy
January 1st, 2010Bad Credit Refinancing Home Loan
December 30th, 2009
If you have bad credit, is it still possible to get a refinancing home loan? A lot of people might think this is close to impossible, but it actually is not at all. There might be a little difficulty in the process, but it is still possible to get your loan application approved. To increase your changes of getting your loan approved, it is better to understand the mechanics of a bad credit refinancing home loan.
In its most basic form, a bad credit refinancing home loan is the typical solution people turn to when they want to replace their existing mortgage plan. A new mortgage plan is then created to replace or refinance the existing one. With this type of loan, you would actually be processing a new home loan application. You should then be prepared to pay certain fees, such as attorney fees, title search, and pre-payment penalty fees.
There are many reasons why a lot of people turn to bad credit refinancing home loans. The most common reason is to pay off the existing mortgage, in the hopes of getting enough money to start over in the cleanest possible slate. This, of course, is quite hard to do because you already have bad credit to your name. What’s more, there are subprime lenders who just might take advantage of your situation because they know that you do not have that many options to begin with anymore. Chances are, these lenders will charge you high interest rates since you might feel pressured to accept these rates nonetheless. Thus, you have to be very cautious when you’re considering applying for this type of loan.
The first thing to do here is to contact your present mortgage lender. If your payment history with this particular lender has no flaws, then he or she might be willing to discuss implementing a reasonable interest rate with you. But if your payment history is not too good, then you should consider shopping for subprime lenders.
Subprime lenders specialize in loans that are of high risk in nature. Because of their specialty, they have a lot of loan programs for people who have bad credit history. Applicants can then choose from their variety of programs that fits their needs and budget the most. Shopping for subprime lenders online is an effective method of getting the best bad credit refinancing home loan possible. Make sure to send out loan applications to as many subprime lenders as possible. This way, you can compare lenders and their mortgage quotes side by side, and find the best alternative for your current situation.
By: Sean Bailey
Bad Credit Mortgage Refinancing – Tips To Turn The Situation In Your Favor
December 26th, 2009
Bad Credit Mortgage Refinancing is available with many financiers; you only need to explore the possibilities. Low interest rates have made refinancing very popular. With bad credit also a person can acquire comparably low rates and enjoy many benefits.
Solutions To Improve Bad Credit Situation:
There are many ways to improve your situation by refinancing your mortgage. You should carefully review each and every aspect before finalizing a refinance. Given below are a few popular options:
1. High interest rates and use of credit cards to obtain the loan lead to bad credit. Higher monthly rates mean higher monthly payments. When you refinance your existing mortgage, you get a lower rate on the monthly payment. So, the monthly payments become comparatively smaller and easier.
2. You can also take a home equity loan, if you have built up some equity in your property. Your house will be used as security. So, the lenders will be unhesitant in providing the loan even after bad credit, as it is a less risky prospect for them.
3. You can refinance your home mortgage to pay off the credit card debts. This will improve your credit rating considerably. The interest rate will be lower than most credit card interest rates. You will pay only one loan every month and so it will be easier for you to pay the borrowed sum off.
4. With bad credit, paying the closing cost is a burden. You need to reduce the refinancing closing cost. Many lenders will be willing to refinance your mortgage. But the best option is to apply for the refinancing from your existing lender. Most lenders prefer to retain their customers and if you have a good solidarity with the lender, you can get some fee waived off.
5. You can utilize the ‘no or low closing cost’ refinancing also as the mortgage rates are very low. It is a practical and favorable solution if you plan to move out of your house within three years. In low closing cost refinancing, the interest rate is slightly higher but the lenders waive off your application fee. They also pay the appraisal and title fee on your behalf and you can save on some amount. Many people with bad credit have low cash availability. Including your closing cost into your home loan is a good option for you. It will not reduce the closing cost and your total loan amount will increase. But you will not have to pay a large sum as the closing cost. You will be paying the total loan amount as easy monthly payments.
There are numerous options available for bad credit mortgage refinancing. You should carefully choose a refinancing option so it does not create a financial burden for you.
By: Saurabh K Jain