Home Loan Refinancing With Bad Credit: A Route to More Manageable Mortgages

Having a debt of several hundred thousands dollars hanging over our heads hardly helps us sleep at night. This is especially true when we have low credit scores, but the fact is that loan options are not so limited just because of a poor credit history, and we can ease our financial worries by getting home loan refinancing with bad credit.

It is generally believed that home loans approved with bad credit are difficult enough to secure, never mind returning to have the loan deal refinanced. But the truth is that there are many advantages to getting a refinancing deal, as much for the lender as the borrower.

Many lenders are quite happy to agree refinancing loans with bad credit, while the overall benefits to the borrower include improved credit rating, lower interests rates and, of course, less financial pressure on your shoulders.

How it Works

The mechanics of home loan refinancing with bad credit is quite straight forward, even if it might seem pretty complicated. Put simply, your existing loan is bought out and a new deal is agreed, with lower interest rates allowing for lower repayments each month. There is little doubt that when the financial screw is turned, that meeting existing loan repayments is a struggle, so lifting that burden is necessary.

The existing home loan, approved with bad credit as a factor, was designed to suit the budgetary realities of that time, but situations can change. So, refinancing is part of the ensuring a default is avoided.

If a 25-year mortgage of $200,000, with monthly repayments of $1,000, was taken out 5 years ago, the amount of the loan principal already repaid could be as much as $50,000. By refinancing home loans with bad credit, the remaining $150,000 is bought out, and interest paid, with a new loan.



Benefits of a Refinancing Deal

There are twin benefits for a borrower that avails of home loan refinancing with bad credit. Firstly, because the original home loan has been fully repaid, the credit rating of the borrower is improved. The attitude of the lending industry is quite simple, so since the loan has been cleared the credit points are earned, regardless of whether or not a loan was used to clear it.

Secondly, because the credit score is improved, the interest rate lenders will apply to home loans approved with bad credit automatically falls. What is more, the refinancing loan is $50,000 lower than the original loan, which means that the monthly repayments are lower too.

So, instead of repayments of $1,000, the new figure might be $800 per month, freeing up extra cash for other bills and debts to be paid with. Clearly then, refinancing home loans with poor credit is an all-round winning strategy.

Applying for Refinancing

The process of seeking a home loan refinancing with poor credit deal is pretty simple. The first step to take is to visit your mortgage provider and discuss the available options. It is possible to approach a completely new lender, but because of the existing relationship, a better deal might be got from the familiar one.

It is also a good idea to get an accurate credit rating. It may have changed since getting your original home loan approved with bad credit, and the degree to which it has worsened or improved can be influential, while any inaccuracies can be corrected. Remember that credit scores are key to refinancing with bad credit, since it can affect the new interest rate.

Finally, make sure all of the paperwork is in order, since this will be carefully reviewed by the lender. Still, a good relationship will mean that a favorable home loan refinancing deal can be agreed, lifting the financial pressures and allowing for more sleep-filled nights.

Getting Mortgage Loans With Bad Credit Depends on Three Simple Qualifications

Owning your own home is a dream that everyone wants to make a reality. The problem is whdn bad credit scores are a part of the equation, which traditional lenders will point to when they stamp rejection on the application. But it is actually possible to get a mortgage loan with bad credit.

The secret is to meet the short list of criteria that lenders stipulate. This criteria is designed to protect them from the risk of defaulted mortgages. And while it is never possible to find a guaranteed mortgage loan with poor credit, the fact that qualification is achieve makes the likelihood of success all the higher.

For the most part, the criteria list comes down to just three points, so everything should be done to make sure that these are met. Basically, they are proof of employment, the size of the down payment and proof of credit status improvement. Then, an applicant can have every faith in getting their mortgage approved with poor credit.

1. Proof of Employment

This is a rather obvious, but is especially important when applying for a mortgage loan with poor credit, since the need to prove that repayments will be made is all the more essential. Bad credit, after all, suggests a bad history with meeting debt repayments, and is generally a black mark against applicants.

Proving employment is easy, with a photocopy of a pay check all that is needed. This serves to also confirm the monthly salary that the applicant is earning, and once enough to cover the required payment is guaranteed, mortgage loans with poor credit are much more likely to be granted.

Bear in mind, however, that to get a mortgage approved with poor credit there needs to be enough excess salary to cover any sudden expenses too. This is part of the calculations that the lenders go by.

2. Size of the Down Payment

Many people ignore the significance of the down payment, believing it has no bearing on the overall application process. In fact, it is significant when it comes to seeking a mortgage loan with bad credit.

For a start, the larger the down payment, the less the size of the mortgage loan required. This obviously means less debt, less in monthly repayments and, usually, a shorter mortgage term.

However, the whole process of getting a large down payment takes time and effort. From the point of view of the lender, with the large down payment, mortgage loan repayment should be easily achievable. This in turn makes them feel the risk level is lower and, therefore, getting a mortgage approved with poor credit is easier.



3. Credit Score Improvement

This ties into the size of the down payment, but includes other steps towards an improved credit score. Improvement is obviously of great benefit when applying for a mortgage loan with bad credit because the lender sees that the applicant is making every effort to get their finances in order.

While approval is never guaranteed, mortgage loans are more likely to be granted when the lender is confident that their investment is safe, and their money will be repaid. Logically, a mortgage approved with poor credit has higher risk, but an applicant that has taken steps to improve their status is likely to continue to make progress.

Recommended steps to enhance an application for a mortgage loan with bad credit is to take out a series of small personal loans, of perhaps just $1,000. When each is repaid, the credit score improves.

Another step would be to take out a larger loan to consolidate existing debt, thus reducing monthly outlays.

Home Loan Interest Rate - Guide To Get The Best

Home Loan is the most affordable means to realize your dream home. Banks charge a percentage on the amount funded as interest. Interest rate in Home Loan refers to this annual percentage (APR) which the borrower needs to pay.

Loans are obtainable from various institutions at attractive rates. Banks propose two types of rates namely fixed rate of interest and floating rate of interest. Though tough it is the most vital judgment for the customer to choose the appropriate scheme while availing home loans. It allows the repayment in fixed equal monthly installments (EMI) over the entire tenor of the loan as it does not change with market fluctuation. A certain percentage of the principle amount is settled and this remains steady for the complete tenure. Floating interest rate also termed as Adjustable Rates refers to interest rate that depends on market and varies according to economic state of the country.

Media reports on banks raising interest rates due to inflation might direct you to opt for fixed interest rate, but in reality, this might not be a good choice. Keep in mind that banks do have the authority to revise the rate because of unforeseen alteration in the money market condition even during the period of agreement. It is therefore essential for the applicant to go through the loan agreement methodically and then fix on the interest scheme. In general floating rates for home loans are cheaper than fixed rates.

Banks however provide customer the option of switching the rate scheme by paying a switch fee any time during the loan tenor. Every financial institution has their own pricing for home loans, land loans, LAP. The interest rate is determined by the bank on the basis of the PLR (Prime Lending Rate). Any change in base rates, will automatically apply to the old customer as well as new customers without any discrimination.

The rate offered by the institution depends on customer's job profile, builder profile, residence location, type of home loans opted for, relationship with the concerned financial organization etc. Banks line interest rates in various ways (ex. monthly reducing rate, flat rate), so just looking at the rate alone one might not get a true picture of which loan quote is the best. Banks do offer housing loans to NRI clients as well, but the rate offered to them is different from that of general customers. RBI has banned lending below Base rates barring restricted categories such as employee loans, loan against fixed deposits etc.

To guarantee that our customers get the unsurpassed interest rate we in Moneylaxmi have consolidated all the information associated with the topic along with current rate of interest for all the banks at one place.