Refinancing your mortgage loan with bad credit – is it a good idea?

In the past, refinancing a mortgage loan with bad credit was only appropriate if interest rates were at least 2% lower than your current mortgage. Today, you can reduce your mortgage rates by a small amount and save a lot of money by refinancing your bad credit mortgage loan.

There are many reasons to refinance your mortgage loan. Refinancing options include low cost mortgage refinances, no cost mortgage refinances and traditional refinances. Here are some reasons why you should consider refinancing your bad credit loan.

* Reduces your monthly payment – This is perfect for those who plan to live in their home for several years. By reducing your monthly loan payment by paying a point or two, you could save your money on a monthly basis. However, if you plan to leave your current home in the near future, you may not stay long enough to recoup your refinancing costs. Be sure to calculate your break-even point to see if it is beneficial to your situation before deciding to refinance a mortgage loan with bad credit.

There are three methods by which a bad credit home loan refinance could reduce your monthly payment. First, you can refinance at a lower interest rate. Second, you can adjust the term of your mortgage. And finally, you can switch from a traditional mortgage to a mortgage program that allows you to make an interest-only payment.

Alternatives to refinancing a mortgage loan with a bad credit score include.

* Apply for a fixed rate: If you want to reduce your initial monthly payments and risk market adjustments, adjustable rate mortgages are for you. Although variable rate mortgages may increase monthly to a level you can no longer afford, this benefits those who do not plan to own the property for several years. A 15- to 30-year fixed-rate loan program may offer you more stability. Although fixed interest rates may be higher, you know the specific amount you will pay each month.

* Elimination of Private Mortgage Insurance – The low down payment housing option offers the home buyer with less than 20 percent down payment. On the other hand, these types of homes often require private mortgage insurance, an agreement for the lender in case the buyers default. You can eliminate private mortgage insurance if the value of the home goes up and your mortgage loan balance goes down.

* Maturity balloon programs for an alternative to refinancing a bad credit mortgage loan – Similar to the variable rate mortgage program, this type of program allows you to reduce interest rates and monthly payments. However, after five to seven years, when the fixed rate term ends and you still own the property, the entire mortgage balance is paid to the lender. In this case, it is advisable to switch to a fixed rate or installment mortgage.

* Home equity collection – Many people overlook the opportunities to earn through their home. However, if you have equity, your home is an excellent source of extra cash. A cash-out mortgage refinance program that is tax deductible allows you to cash out and consolidate your high interest rates, fund your children’s education and even pay for home improvements. This is a great alternative to refinancing a mortgage loan with bad credit.

There are many online resources that can help you decide if you should refinance a mortgage loan with bad credit. You can find many sources of information and websites about refinancing your bad credit home loan with a few clicks of the mouse on your computer. However, the key to your success is analyzing your situation and figuring out what type of refinancing would benefit you the most.

Emanuele Allenti is the owner of the Bad Credit Home Loan [] and Bad Credit Home Loan [] websites.

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