As the sub-prime mortgage industry goes through convulsions, you may think that because you have bad credit, your ability to refinance your mortgage is in jeopardy. You may be partially correct. Mortgage lenders are re-evaluating their loan portfolios and taking a good look at the qualifications and credit scores of prospective borrowers. Some lenders are getting out of the sub-prime market altogether.
Some lenders are exiting the market by choice, while others are being forced out due to the sheer weight of the bad loans they're now carrying. About 100 mortgage lenders that catered primarily to the sub-prime section of the market went out of business between the last quarter of 2006 and mid 2007. That means that your options, if you're a sub-prime borrower, are becoming more limited. But hold on just a second, all is not lost.
You still have options when it comes to refinancing your mortgage however. Because of the recent credit industry problems, be prepared to pay a higher interest rate than you would have had to pay even 6 months ago. For that matter, even borrowers with good credit are finding their options more limited that they were at the beginning of 2007 They're also paying higher interest rates.
Thankfully you aren't in the same position when refinancing a mortgage as when trying the same tactic with credit cards or revolving accounts. That's because a mortgage is a secured loan, where a credit represents unsecured debt. Obviously a lender faces less risk of default when their loan is secured in some fashion.
You may want to improve your mortgage interest rate because rates have dropped since you got your mortgage, or you have an ARM or interest only mortgage that's about to adjust. Whatever your reasons for wanting to refinance, even if you have pretty bad credit, you can usually have your mortgage refinanced and get lower monthly payments in the process.
You can possibly get some cash out too, by getting what's termed a "cash out" refinance. You'll get to tap some of the equity in your home that's currently just sitting there and not working for you. If you need money to pay off medical, home or car repair bills, using the equity in your home is usually a better option that a credit card. Because it is a secured loan, you'll get a much better interest rate. In addition you can often use the interest you do pay as a tax deduction.
It's also a great way to get capital for investment, such as the down payment on a rental property. This way you can take advantage of the proven wealth producing principal of leverage. Be aware however, that although real estate secured loans are typically at comparatively low interest rates, you need to be confident of an investment return that will comfortably exceed your mortgage interest rate. If it does not, you better think twice before you use cash out refinance proceeds for investment purposes.
How can you go about refinancing your mortgage, credit rating be damned? There are several avenues to explore. You can check the rate and fees charged by your local bank, although in many cases you'll be able to do better with other lenders. Possibly a better choice is a credit union, if you happen to be a member. Many credit unions are non profit, returning profits to the members in the form of better interest rates and lower fees. In many cases your best bet will be through a mortgage broker, either local or one of the on-line offerings. A broker will have many different mortgage products to choose from and is in many cases better able to find the right product for you than a loan officer that is limited to a single company's products. If you prefer to work with someone local whom you can meet face to face, a local broker may appeal to you.
An option that has become extremely popular to help borrowers with marginal credit refinance mortgages are online referral services. The online mortgage referral services allow many different lenders to actually bid for your mortgage business. The known competitive bidding situation helps generate better rate and fee structures for conumers. Some of the lenders are very aggressive, which is part of the reason the sub-prime mortgage market is in so much trouble today. That is good for you if you have bad or marginal credit though. The more lenders you're exposed to, the better your chances of finding a mortgage product that fits your needs and budget.
The bottom line is that, since your mortgage is secured by the equity in your home, there's a great chance you can enjoy refinancing. If you have any equity to use as collateral you will probably be well on your way to the refinance you're looking for. The next step is to actually start looking.
About the Author
There's no reason you should be left out in the cold any longer while your family and friends enjoy the fruits of their low interest mortgages. Discover what you need to know to get the best refinancing deal, weather you have bad credit or great credit. Go to the bad credit refinance guide.
Brak komentarzy:
Prześlij komentarz