Bad Credit Remortgage

A common question many people have is “How can I refinance my mortgage if I have bad credit?” The answer is a resounding yes, however the process is more cumbersome and somewhat different than for people with good credit.

Bad credit is an obstacle for more and more Americans during the current economic crisis. The good news is that bad credit doesn’t have to prevent you from being able to remortgage  your home.

Before you embark on your search to find a lender, you should explore the reasons you want to remortgage. For people with bad credit, the answer to this question should not be to get a “cash-out” refinance. Lenders are less likely to work with you if you are attempting to get cash out of your home. If the answer to this question is to take advantage of historically low interest rates and save money over the life of your loan, then you are on the right track and have a good chance of getting a remortgage.

Steps to Get Your Mortgage Refinanced with Bad Credit

Bad credit will make it a bit tougher to get approved for your refinance, but you can still get refinanced. There are a number of things you can do in order to get your remortgage refinanced; here are a few.

1. Save money. You are more likely to get refinanced if you have the money in the bank to reduce the loan-to-value ratio and do not intend to cash out. You will also need to have the cash on hand to pay closing costs. Banks will look at your willingness to invest your own money into this venture and may be more willing to loan you money. Also, larger down payments and paying points will make a significant impact on the amount you will pay in the long run in interest. The less money you owe, the less you will pay in interest and the more likely you will receive a lower interest rate on top of that.

2. If you have recently filed for bankruptcy or have had a significant history of late or missed payments, wait a little while before applying for a mortgage. Most banks will overlook small money mismanagement issues or late payments, but trends that indicate larger issues will not be missed.
3. Shop around: Find a lender who has a proven track record for being able to help people with bad credit. It will probably cost you a little more to obtain a loan with a lender that specializes in helping people with bad credit, but working with a knowledgeable lender will be better in the long run.
4. Be patient. Finding a refinancing option for people with bad credit can be an exhausting process, but it is possible. Just keep that in mind as you continue your search for a refinance opportunity.
5. Lowered monthly payments: it is true that refinancing your mortgage will extend the amount of time that it will take you to payoff your home, the lower monthly payments should help free up some extra cash that you can use to pay off other debts and start cleaning up your bad credit.

The last thing to remember is that many so called “bad credit” lenders, or lenders who specialize in finding loans for people with bad credit, fall into the category of predatory lenders, who are in the business of taking advantage of people who are in situations where their financial choices are limited. These are generally small finance companies and not banks or credit unions. You can protect yourself and your interests by educating yourself on mortgages and remember the golden rule, if it sounds too good to be true, it probably is. Get everything in writing. A reputable lender will make sure that you understand everything about your loan and that the refinance makes sense. A predatory lender only cares about collecting the exorbitant fees associated with their loans.

All in all, if you feel like you should refinance your home loan, don’t let your bad credit stop you from pursuing your options. Bad credit can be a speed bump, but not a roadblock if you know where to look and what to expect. If you find that you just cannot get refinanced, take some time and start making progress toward paying off some debt, cleaning up your credit, and saving money. If, after six months, you can show a potential lender that you are making strides toward paying your debt responsibly and that you are willing to make a personal investment in your future, they will be more likely to want to invest in you, too. Reestablishing good credit will take some time and a lot of discipline, but well worth the effort in the end. You might be able to get an even better deal a few months down the road because your interest rate may be even lower than you anticipated.