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Sub Prime Mortgage Refinancing: What You Need to Know

Homeowners with tarnished credit can still refinance their mortgage loan. In fact, you can use mortgage refinancing to rebuild your credit and qualify for even better mortgage rates. Here are the basics of bad credit mortgage refinancing to help you decide if this type of mortgage is right for you.

Bad Credit Mortgage Refinancing: You Should Expect Higher Interest Rates

There are many mortgage lenders willing to approve your mortgage; however, you will pay higher interest rates and fees most likely. Mortgage refinancing for homeowners with tarnished credit may require a type of specialty lender known as a Sub-Prime mortgage lender. Because you will pay more it is important to carefully research mortgage offers and comparison shop for the most competitive interest rate. Sub Prime Mortgage loans are when you do not qualify for the mortgage market interest rates, which will make the risk heavier.  You have several types of Sub Prime mortgage loans:

Interest Only – Sub Prime Mortgage Loan which allows us (consumer/borrower) to only pay interest for a period of time, which is usually 5-10 years.  You have fixed rate Sub Prime Mortgage that converts to variable rates.  Also, Sub Prim Mortgage Loans where you may pick your monthly payments aka “pick a payment”.

Bad Credit Mortgage Refinancing: Make Sure You Choose the Right Lender

Mortgage refinancing with a sub-prime lender is more risky than financing your home with a traditional mortgage lender. Bad credit lenders often engage in predatory lending practices. Choosing a voracious lender when refinancing your mortgage could lead to paying more than needed and you could even lose your home to foreclosure (Don’t want this to happen!).

Get a quality home improvement loan to finance your project!

When comparing loan offers it is important to request the Good Faith Estimate from each lender you consider. Pay close attention to lender fees and closing costs found on the estimate. The origination fees you pay should not be higher than 2% of the loan amount for bad credit mortgage refinancing.  As a side note make sure you get homeowners insurance.

 


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