Home Equity Loans Rate | Bad Credit Refinancing
Refinancing with bad credit is definitely possible and may be a solution to some of your money problems. But there are risks, so don’t just jump into a refi without doing your due diligence.
Refinancing can lower your monthly mortgage payment, put extra cash in your pocket or raise money for your kid’s college tuition. And it can be done with bad credit, a bankruptcy or even a foreclosure - if you have some equity in your home.
Equity is simply the difference between the appraised value of your home and what you owe on your present mortgage. Since lenders will refinance a mortgage to allow you get out some of the cash value you have in your home, this equity may be your most valuable asset. And the more equity you have in your home, the better chance you have a getting a new mortgage.
However, if you do have bad credit, lenders will probably charge higher interest, a couple of extra points or both to cover their risk. But it may be worth it. For example, if you get enough cash out to consolidate your unsecured credit card debt and still reduce your monthly payments, you’ll be way ahead of the game.
But refinancing is not the perfect answer for everybody. Don’t bite off more than you can chew. There are unscrupulous lenders who will ignore your poor credit and promise you anything to get their hands on your home. They really don’t care if you pay back the mortgage. In fact, they prefer that you default so they can foreclose, sell your home and take all the money you put into it.
They have nothing to lose. If you pay back your loan, they make money. If you don’t, they get your home. Either way they win.
But you can end up losing everything. So be careful and absolutely clear about the terms and costs of a refinanced mortgage. And never deal with just one lender. That way you can compare loan packages from different sources. You don’t want to be conned into getting even more deeper into debt than you are now.