A Mortgage Refinance with Bad Credit – The Pros and Cons
To many, the term ‘bad credit’ is the end of the world when it comes to getting financing in the near future. However, it doesn’t always have to be like that, you can take the bad credit mortgage refinance option!
Mortgage refinance vs. equity finance
It is essential at the outset that you understand there is a fundamental difference between mortgage refinancing and equity financing. Basically, with equity financing you are using the surplus amount you may have stored up in your property between your outstanding mortgage amount and the appraised value of your home. However a mortgage refinance is where you find a new lender willing to lend you the whole appraised value of your property, the sum of which you then use to repay your existing mortgage lender and the remaining sum you can utilize in any manner you wish. Because of this, you are faced with a different set of problems than would be the case with an equity financing.
The pros of a bad credit mortgage refinance
Aside from any possible equity financing you can do with your property, without doubt the biggest upside to a bad credit mortgage refinance is the fact that it is a long-term and cheap form of borrowing. Interest rates are likely to be low and, possibly, can even be fixed. You could even possibly benefit from certain tax advantages from a bad credit mortgage refinance.
Because of this, bad credit mortgage finance can allow you to do things financially that may not otherwise be available to you as a person with a bad credit rating. You could use the equity you free up after you repay your original mortgage lender to invest in stocks and savings that will give you a better yield than you are currently getting on the property.
Alternatively, you could pay off all outstanding debts you have so that you have no interest and debt payments to make each month – merely a mortgage repayment. Finally, you could even use the equity you get to invest in a long-term investment plan like your pension. In fact the options are so limitless that you should really consult with a financial expert who can best advise you on how you should put that money to the best use for you!
The cons of bad credit mortgage refinance
The number one downside to any mortgage refinancing, whether it be bad credit or otherwise, is the fact that mortgage lenders do not like to be repaid early. As such they usually incorporate some expensive penalty clauses to try and make it not worth your while repaying them early. With this in mind, you will need to read your original mortgage agreement with your original lender very carefully to make sure you won’t have any onerous default payments to make; or, you could try and arrange for the new lender to swallow these.
That said, if you make any arrangements with the new lender that they agree to pay these fees for you, you then need to make sure they do not put any restrictive clauses in your new refinance mortgage agreement that would prohibit you from refinancing your mortgage again at some time in the future if the occasion warrants such.
Without a doubt, as a person with a bad credit history and bad credit rating, a bad credit mortgage refinance can open up avenues to you that would not otherwise be there. You do, however, need to give consideration as to whether or not you want to take this route. Not least because at the end of the day your house and family home is on the line!
About The Author
Monique Thomas helps you find the resources and information you need to make an informed decision on your finances. Subcribe to our announcement list by visiting: http://www.crazydebt.com
Written by: Monique Thomas
User Review( votes)
- 90Bad Credit Mortgage Refinance If you are looking to refinance your mortgage but believe you will be unable to because your credit may be challenged by late payments, bankruptcy, charge off's, or unpaid medical bills to name a few, don't worry, there is hope. There are literally thousands of lenders…
- 87Gone are the days when money could be fetched either by mere mortgaging or financing something. Now it is time to get money via an amalgam of the two i.e. Mortgage Refinance. Mortgage refinance is a smart idea to have a good credit sum and repay it in an easy…
- 83Unfortunately, those people who have poor credit ratings, even those who are trying to reform their ways, are rarely taken seriously when trying to conduct normal transactions. A bad credit rating can make it exceedingly difficult to get important financing, such as car loans, mortgages, and credit cards. Fortunately, a bad…
- 81The airwaves these days seem to be full of advertisements for consumers to obtain their credit reports and also apply for credit cards. Apart from encouraging consumers to obtain their credit reports, consumers are not told and do not fully understand why it is that important. Most people, after all,…
- 80If you have owned your home for a period of time long enough to obtain some equity through your monthly mortgage payments and appreciation, you may be considering borrowing off the equity you have established in your home. This can be known as cash out refinancing, where you basically refinance…
- 80You may have become used to the monthly house payment that you make. But for many of us refinancing our homes is a great way to save money, lower the house payment, and unlock some of the equity already built change such as refinancing in the house. What exactly does…
- 79If you are looking for a mortgage refinance, it never hurts to shop around for the best rate and deal. Shopping around could mean the difference between paying or saving thousands of dollars in closing costs, and interest fees'. If time happens to be on your side, and you don't…
Share Your Thoughts
Category: Tips Articles