Is your monthly payment high? Do you have an adjustable rate and like to switch to a fixed rate? If yes, refinancing can be beneficial for your situation. The interest rates have dropped in the past 5 years. What this means is that those homeowners who purchased their homes with high rates can refinance and lower their payments every month. What refinancing involves is basically creating an entirely new loan which the current homeowner must apply for. Those with good credit should have no problem refinancing and lowering their rates. There are however options for those with bad credit.
Home Loans- Refinance

Most often those with bad credit have a difficult time getting approved for a loan. This is caused by those that have a history of late payments, non-payments and those refusing to pay their creditors. People with this type history are considered high-risk candidates. Since people with bad credit are considered high-risk lenders and banks are more unwilling to do business with them. Refinancing however work a bit differently. When a person refinances their home loan their home serves as collateral. So, if the borrower would happen to default on their payments their home can be take away by the lender.

When to Refinance

Knowing when to refinance is a crucial step in refinancing. There are always advertisements for low rate loans on the radio and television. Those that take advantage of the lower rates reduce their monthly payments. The downside is that if not done correctly refinancing can end up costing you more than it actually saves. Refinancing is basically a new mortgage and comes along with fees like closing costs, settlement fees and title search fees. Some people are sometimes refinancing before their home has gained any equity. Refinancing your current loan into a shorter term loan can also serve to boost your homes equity.

Those with bad credit can benefit by refinancing because most times the homeowner will get a lump sum at the closing. That money can then go towards improving their credit by paying off some debts and staying on time with their new loan. However this can only happen if the home has enough equity. Most professionals will recommend refinancing after two years of having your mortgage. This allows the home to actually grow in equity. Knowing when to refinance is not easy to determine however with some patience and research it can end up saving hundreds of dollars a month.

-M Petrone

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