Bad Credit Home Loan Refinancing: Hitting Two Birds with One Stone

Apr 20
17:41

2013

Melissa Kellet

Melissa Kellet

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When financial situations change, a home loan may become too expensive to maintain, especially when poor credit ratings are involved. But through bad credit home loan refinancing, the pressure can be lifted.

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Nobody needs to be told that buying a home is an expensive business. But even years after the feat has been achieved,Bad Credit Home Loan Refinancing: Hitting Two Birds with One Stone Articles with mortgage repayments well underway, things can still go wrong. A sudden change in employment status, for example, can create serious financial pressure, making repayments hard to meet. This is where bad credit home loan refinancing can save the day.Refinancing a home loan really just means restructuring it to make it easier to pay, lifting some of that pressure that was causing such problems. And refinancing home loans approved with bad credit a factor is an especially positive move, as the terms of a bad credit home loan are usually harsh anyway.But as well as easing the pressure, striking a home loan refinancing deal with a mortgage lender can also have a very positive effect on the credit rating of the borrower. So, the move effectively hits two birds with one stone.Easing the Financial PressureThe fact that mortgage repayments are the biggest monthly expense of any typical household means that reorganizing this debt can make a huge difference to the overall financial situation. Through a bad credit home loan refinancing deal, the original mortgage is bought out by a second mortgage that is inevitably smaller.Logically, that means the repayments are smaller than those that had been so crippling, and that means that a sum of money - perhaps as much as $300 or $400 per month - is freed up. That money can then be used to deal with other debts, perhaps paying a credit card bill, or catching up on utility bills.All in all, by refinancing home loans approved with bad credit, some breathing space can be created, easing the financial pressure but not at the expense of the home. The fact that home loan refinancing can also be used to tap into potential cash via home equity, means that even more pressure can be lifted too.Improving Your Credit RatingThe advantages of improving a credit rating are not difficult to see. It is that rating that influences the interest rate that is charge on a loan or mortgage, so the better it is the lower the interest rate. As a result, the lower the monthly repayments. Bad credit home loan refinancing can have a direct and positive effect on the credit rating the borrower.How this is possible is quite simple. In refinancing home loans, approved with bad credit or not, the original mortgage is bought out, and in so doing is marked down as having been paid in full. Even though a new mortgage has been taken out, the credit agencies still take note that the original loan was cleared, and increase the credit rating accordingly.With a higher credit rating, the interest rate on the new mortgage is lower than on the first. And, since the home loan financing deal means a lower principal too, the overall savings are significant.Finding a LenderFor many people, getting a bad credit home loan refinancing deal is as simple as talking to their existing mortgage provider. This can be a good move, since the mortgage provider already knows the borrower, his reputation and will get their mortgage repaid and sell a new one. Any way they look at it, they win.Of course, refinancing home loans approved with bad credit also benefits the borrower, but remember that a better deal may be possible by going to another mortgage provider. The buy-out process is the same, but there may be some extra fees to pay with this home loan financing deal, so be sure to check on that.