Refinancing Your Bad Credit Home Loan: A Good Idea?

Previously, bad credit home loan refinancing was only appropriate when interest rates fell at least 2% below your current mortgage. Today, you could lower your mortgage interest rates by a small amount and could save yourself 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 your 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 deciding to refinance a bad credit home loan.

There are three methods by 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. Lastly, 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 mortgage loan program may offer you more stability. Although the 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 a 20 percent down payment. On the other hand, these types of homes typically require you to get private mortgage insurance, a deal designed for lenders when homebuyers default. You are eligible to drop private mortgage insurance when your home value increases and your mortgage loan balance decreases.

* Balloon Due Programs 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 monthly payments. However, after five to seven years, when the fixed rate term ends 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 home loan at a fixed rate or a mortgage-type.

* Home Equity Cash Withdrawal: Many people overlook the possibilities of earning money through their home. However, if you have equity, 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 a few clicks of your computer mouse. However, the key to your success is to analyze your situation and figure out what type of refinancing would benefit you the most.