Interest rates are at an all time low, which has lead many people to refinance their home mortgages with lower rate loans. Since that means less interest, it saves substantial money over the course of the total loan period. If you’re wondering about mortgage refinance with bad credit, it’s not impossible… but it can be challenging.
Understanding the Impact of Credit History
Bad credit history depicts you as a greater loan risk, resulting in higher interest rates. Credit scores run from 300 to 850, and 35% of the calculation relates to your past payment history. If you’re considering mortgage refinance with bad credit history, it’s essential that you examine the numbers very carefully. Things like closing costs and the various fees involved may eclipse the savings on a loan rate that’s only slightly lower than the original. Also, refinancing may look attractive because your interest rate will lower, but the term of your loan may extend. This likely doesn’t make sense over the long haul. Not all mortgage refinance loans are what they’re cracked up to be.
Working on a Poor Credit Score
Generally, the higher your credit rating, the better interest rate you’ll be offered. Boosting your score is a process. Visit www.annualcreditreport.com and get your once-annual free report from the three major reporting credit bureaus (Experian, TransUnion and Equifax) and see if there are any mistakes keeping you down. You can visit the individual credit bureau websites to find out about getting errors rectified. At the same time, get started paying down your existing balances — on time. If you aren’t carrying any credit cards and aren’t eligible, a secured line of credit may be available through your bank. These require an initial deposit. The important thing is to be sure that the card you end up with is actually monitored by the credit bureaus.
Other Potential Options
Another factor that may help you secure a lower interest rate is the bank balance you carry. If your bank balance remains low, that doesn’t instill faith in a lender. But if you’re able to boost your balance, perhaps by liquidating assets, that can help improve your profile for the loan. Another idea involves enlisting the help of a co-signer.
Steps to Refinance
Lowering your monthly mortgage payments without doing a standard refinance can possibly be achieved via the Home Affordable Modification Program (HAMP), which can help you avoid foreclosure if you’re struggling. If you’ve actively fallen behind on your mortgage payments, the Home Affordable Refinance Program (HARP) may be able to assist you.
Handling a mortgage refinance with bad credit is challenging, but there are subsidies in place to help those facing hard times. You may want to seek some mortgage refinance advice before moving forward with a plan – it never hurts to ask. You may have overlooked something that could be of use to you in securing a better home mortgage refinance rate.