Previously, bad credit home loan refinancing was only appropriate when interest rates dropped at least 2% below your current mortgage. Today, you could reduce your mortgage interest rates by a small amount and could save you a lot of money with a bad credit home loan refinance.
There are many reasons to refinance your home loan. Refinancing options include no-cost and lower-cost mortgage refinances and traditional refinancing. Listed below are several reasons why you should consider refinancing your bad credit home loan.
* Lowers your monthly payment – This is perfect for those who plan to live in their home for several years. By lowering your monthly loan payment, which pays one or two points, you could save money each month. However, if you plan to move out of your current home in the near future, you may not be around long enough to recoup your refinancing costs. Be sure to calculate your break-even point to see if it will benefit your situation before you decide to refinance a bad credit home loan.
There are three methods in which a bad credit home loan refinance could lower your monthly payment. First, you could refinance to a lower payment. Second, you could adjust the term of your mortgage. Finally, you could switch from a traditional mortgage to a mortgage program that allows you to earn interest-only payments.
Alternatives to a bad credit home loan refinance
* Apply for a fixed rate: If you want to lower your initial monthly payments and risk increasing market adjustments, adjustable-rate mortgages are right for you. Although adjustable-rate mortgages can jump monthly to levels you can no longer afford, this benefits those who don’t plan to own the property for several years. A 15- to 30-year fixed-rate home loan program may offer you more stability. Although fixed interest rates may be higher, you are aware of the specific amount you will pay each month.
*Private Mortgage Insurance Elimination: The Low Down Payment Home Option gives the buyer the ability to get the home with less than 20 percent down payment. On the other hand, these types of homes typically require you to obtain private mortgage insurance, a deal designed for lenders when homebuyers default. You are eligible to remove private mortgage insurance when the value of your home increases and your mortgage loan balance decreases.
* Balloon programs due for an alternative to a bad credit home loan refinance – Similar to the adjustable rate mortgage program, this type of program allows you to lower interest rates and lower monthly payments. However, after five to seven years, when the fixed rate term is over and you still own the property, the full balance of your mortgage will be paid to the lender. In this scenario, it is advisable to adjust to a fixed-rate or mortgage-rate home loan.
* Home Equity Cash Out – Many people overlook the possibilities of earning money through their home. However, if you have capital, your home is a great source of extra cash. A tax-deductible cash-out mortgage refinance program allows you to collect and consolidate your high interest rates, finance your children’s education, and even pay for home improvements. This is a great alternative to refinancing a bad credit home loan.
There are many resources online that can help you decide if you should refinance a bad credit home loan. You can find many sources of information and websites on how to refinance your bad credit home loan with just a few clicks of your computer mouse. However, the key to your success is to analyze your situation and find out what type of refinancing would benefit you the most.
