Are you thinking about refinancing your home but you are worried about your bad credit rating? There are many ways and means on how you can refinance bad credit mortgages without resorting to desperate measures, particularly if you are already looking into lending companies that offer exorbitant interest rates in return for fast cash. Needless to say, this can lead to foreclosure of your property faster than you can say “bad credit rating”. First thing you have to remember is that: refinancing any loan, mortgage or otherwise, is always a risky business. You are trading off the chance to pay off your previous loan by taking out a larger loan. The interest for the second loan may be smaller, but that still translates to a lot of money to pay for before the policy matures.
If you are indeed on a bad credit rating, the lending company usually considers you as a high-risk client and therefore, increases the interest rates on your loan as they see fit. In other words, you may be digging a bigger financial hole for yourself that will be very, very difficult to climb out from. Your home (or whatever property you have offered as lien) may already be in the foreclosure real estate market even before you can benefit from the cash you are supposed to get from your refinance bad credit mortgage. In order to avoid this scenario, here are some things you ought to consider.
- Ask the lending company that owns your first loan policy for a second mortgage. Sounds easy enough, right? But it might surprise you that many homeowners do not do so thinking that they will automatically be turned away. Although there might be a lot of other lending companies out there offering seemingly better refinancing options, your lender knows already the value of your home regardless of current real estate market trends. That means: you do not have to go through all the process of application again like having your home inspected, appraised and improved – and that will save you hundreds of dollars easily. Unless you have the time and energy to spare while you wait for your property to rise in value, it would be more prudent to simply ask your present lending company to help you out. If they refuse based on your current bad credit rating, then that is the only time to scout around for another.
- Never assume that you are on everyone’s bad credit rating list. Yes, your credit score may not be that admirable, but it may not be that bad too. Try to secure a copy of your most recent credit rating and then shop around for lending companies that do not specialize in bad credit mortgages. There are lending companies that offer prime refinancing loans to people with low credit rating. How low exactly is “low” varies differently from each lending establishment to the other. You may also want to look more into private lenders as opposed to financial institutions (like banks) and other commercial lending establishments. Only when you have exhausted your options for prime lenders should you be looking into sub-prime lending companies.