To many, the term ‘bad credit’ is the end of the world when
it comes to getting financing in the near future. However,
it doesn’t always have to be like that, you can take the
bad credit mortgage refinance option!
Mortgage refinance vs. equity finance
It is essential at the outset that you understand there is
a fundamental difference between mortgage refinancing and
equity financing. Basically, with equity financing you are
using the surplus amount you may have stored up in your
property between your outstanding mortgage amount and the appraised value of your home. However a mortgage refinance is where you find a new lender willing to lend you the whole appraised value of your property, the sum of which you then use to repay your existing mortgage lender and the remaining sum you can utilize in any manner you wish. Because of this, you are faced with a different set of problems than would be the case with an equity financing.
The pros of a bad credit mortgage refinance
Aside from any possible equity financing you can do with
your property, without doubt the biggest upside to a bad
credit mortgage refinance is the fact that it is a long-term and cheap form of borrowing. Interest rates are likely to be low and, possibly, can even be fixed. You could even possibly benefit from certain tax advantages from a bad credit mortgage refinance.
Because of this, bad credit mortgage finance can allow you
to do things financially that may not otherwise be
available to you as a person with a bad credit rating. You
could use the equity you free up after you repay your
original mortgage lender to invest in stocks and savings
that will give you a better yield than you are currently
getting on the property.
Alternatively, you could pay off all outstanding debts you
have so that you have no interest and debt payments to make each month merely a mortgage repayment. Finally, you could even use the equity you get to invest in a long-term
investment plan like your pension. In fact the options are so limitless that you should really consult with a financial expert who can best advise you on how you should put that money to the best use for you!
The cons of bad credit mortgage refinance
The number one downside to any mortgage refinancing,
whether it be bad credit or otherwise, is the fact that
mortgage lenders do not like to be repaid early. As such
they usually incorporate some expensive penalty clauses to
try and make it not worth your while repaying them early. With this in mind, you will need to read your original mortgage agreement with your original lender very carefully to make sure you won’t have any onerous default payments to make; or, you could try and arrange for the new lender to swallow these.
That said, if you make any arrangements with the new lender
that they agree to pay these fees for you, you then need to
make sure they do not put any restrictive clauses in your
new refinance mortgage agreement that would prohibit you
from refinancing your mortgage again at some time in the
future if the occasion warrants such.
Without a doubt, as a person with a bad credit history and
bad credit rating, a bad credit mortgage refinance can open
up avenues to you that would not otherwise be there. You do,
however, need to give consideration as to whether or not you
want to take this route. Not least because at the end of the
day your house and family home is on the line!