Refinancing a Bad Credit Home Loan May Be a Good Idea
Because of unscrupulous lenders in the past decade, many bad credit home loans are fraught with difficulties. Refinancing, especially for those holding adjustable rate mortgages, could be a money-saver now that interest rates are low.
When mortgage rates fell a point or two below the current interest rate, it was a good time for refinancing your bad credit home loan. Nowadays it is a very smart move; you will save substantially with a bad credit home loan refinancing in the long run. Really, there are many considerations as you contemplate refinancing, including options such as low-cost or no-cost mortgage refinancing, as well as traditional refinancing.
Decreasing Monthly Bad Credit Home Loan Payments
If you are looking to stay on your property for a good length of time, this is a perfect move. You stand to make monthly savings by decreasing your usual bad credit home loan payments. On the other hand, if you plan to leave your home for another in the short term, you may not stand to regain any of the costs incurred by the refinancing because you will not have stayed there long enough. You need to do a break-even calculation to see if refinancing your bad credit home loan will pay off over the time you spend in the home.
Three Methods of Refinancing
Refinancing your bad credit home loan could involve one of three methods. One way would be to get a refinancing that lowers your monthly payment. Another would involve reducing the term or length of years you would hold the mortgage. The other would call for you to switch to a mortgage plan allowing you to make interest-only payments.
Applying for a Fixed Rate Mortgage
Adjustable rate mortgages (A.R.M.) may decrease monthly payments in the beginning, but market lending rates could significantly increase your monthly payments to a point that you may no longer be able to afford them. That is the risk with a bad credit home loan – A.R.M. This is could be okay if you only plan to stay on the property for a short time. Though the interest rates may be a little higher, a fixed interest loan would eliminate your payments being tied to market lending rates. You would know the specific amount you would pay from month to month.
Removing Private Mortgage Insurance
There is a low down payment option for refinancing your bad credit home loan. You can move in with less than 20% down. These do require you to purchase home-buyers insurance that is designed to cover the seller should you default on the loan. After the amount of time it takes for your home value to increase, or your loan balance to decrease, you should be able to drop that expense.
Using a Balloon Program
A balloon mortgage program allows for decreasing the interest rate and the monthly payment you experience with a bad credit home loan. After five to seven years, the fixed-rate term comes to an end. If you are still on the property, the whole balance comes due to the lender. At that point, you would need to adjust to a fixed-rate or other form of home loan.
Cashing Out Home Equity When Dealing with Your Bad Credit Home Loan
Do not fail to consider the possibility of earning money through your home. If you have equity, you property could be a source of a good deal of cash. A cash-out refinancing allows you to refinance and consolidate your interest rates, and get enough cash back to pay for home improvements, or even college expenses for your youngster. This move is tax-deductible. Bad credit home loan refinancing could get you the money you need for a big expense or an unforeseen emergency.
Plenty of Refinancing Resources
You should learn plenty about your options for bad credit home loan refinancing. The Web offers many information sources, even whole websites, focused on bad credit home loan refinancing. The crux of the matter is scrutinizing your financial and housing situations to find which would work best for you.
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ABOUT THE AUTHOR
Melissa Kellett has a Master in Finance and has been a financial consultant for years. She specializes in Loans for Bad Credit people and also in helping people to get approved for Personal Loans, unsecured loans, Personal Loans Poor Credit, no credit check loans, student loans among many other financial products. Visit her site at http://www.speedybadcreditloans.com