Resources for people with Bad Credit & information on Credit Reports, Debt Consolidation, Auto Loans, Mortgages, & more.

Bad Credit Mortage Refinance Resource Guide

Bad Credit Mortage Refinance

There are two main situations for Bad Credit Mortgage Refinancing:

1. Someone who owns a home with equity and has Bad credit and credit card debt with high interest. They would like to pay off their credit card debt by using the equity in their home. The interest rate on the bad credit mortgage refinancing loan will probably be higher than a conventional loan, but the house payment should still amount to less than the total of the high interest debt.

Using the cash from your home equity to pay off debt is also known as debt consolidation. The appraised value of the home should have grown to allow a larger loan to be taken. The new loan has to be high enough to cover the closing costs with money left over to pay off the credit card debt.

An advantage of Bad Credit Mortgage Refinancing is that the term of the loan is longer, causing payments to be smaller. Also, even a high interest bad credit mortgage refinance loan will carry a lower interest rate than the high interest credit cards. So, the new house payment will be smaller than the total of the old house payment and the credit card payments together. This can have a negative effect, however. If the homeowner continues to create more debt with credit cards and they no longer have equity in their house, bankruptcy or forclosure can happen.

Before deciding on bad credit mortgage refinancing, you must realize you have to use the cash from your equity to pay off your debts only, and have a plan in place for future money management.

2. Someone who had bad credit when they originally purchased their home and had to take out a high interest mortgage loan at that time. It has been over two years and the homeowner made every payment on time and has no other bad credit. They now would like to refinance the mortgage to receive a better lower mortgage rate.

Trying to refinance a bad credit mortgage even after two years of paying your mortgage on time may still be difficult. You may not be able to obtain a conventional low interest loan. There are many factors that are considered such as the income and debt of the homeowner.

If the new loan has an interest rate with two or more percentage points below your current loan or if you plan to stay in your house for 3 or more years than refinancing a bad credit mortgage is a good idea.