Bad credit mortgage refinance is right for you if the current interest rate on your mortgage is at least 2 percentage points higher than the prevailing market rate. This figure is the safe margin after deducting the savings you can expect to get and the cost of refinancing your mortgage.
The real calculation might take other consideration, such as how long you plan to stay at your house to realize the savings from your mortgage refinancing. And since you have bad credit you may want to check whether the interest spread is attractive.
What Is Bad Credit Mortgage Refinance?
Bad credit mortgage refinance is taking out a new mortgage to cover the cost of a previous mortgage, if you have a bad credit rating. The right second mortgage should have a lower rate of interest than the first mortgage.
Mortgage refinance with bad credit is possible when you take the first mortgage during a period of high interest rates. By the time the rate of interests have declined, you can take the second mortgage on a lower rate of interest.
The difference in the interest rates should be significant so that you can still have savings after paying off all of refinancing costs. The key to get a significant savings from the refinancing is to opt for bad credit mortgage refinance at the right time.
The Right Time to Refinance
To get a significant savings after paying off all of refinancing costs, make sure that you opt for bad credit refinance at the right time. To find the right time, shop around for rates and various terms and conditions.
Remember to research the loan market thoroughly to find out the trends of rate of interest in refinance lending. And understand your credit scores before you take any bad credit mortgage refinance loan to estimate the interest rate offered by mortgage lenders.
Bad Credit Mortgage Refinance
Once you estimate the interest rate on the loan, calculate the amount and the time you have made payments on your current mortgage. If you’ve made payments for a year, for example, the difference between the first mortgage and the refinance amount might not be significant.
The other areas to look at are the loan amount that you are seeking, the collateral that you willing to put up and your ability to pay back the debt.
When the time is right for mortgage refinancing, look for reputable bad credit lenders that process loans in-house and not outsourcing for credit refinance. This saves time as well as money. Also, look for experienced loan counselors who can give you the best advice.