Bad Credit Mortgage Refinancing

Refinancing a mortgage can help a person with bad credit reduce their mortgage payment amount and improve their credit situation. Mortgage refinance can also put a person in a better financial situation.

When you refinance a mortgage, you take out a new mortgage that pays off your existing mortgage and takes its place. After you complete the refinancing you make your mortgage payments to the holder of the new mortgage.

Taking advantage of refinancing can reduce your interest rate and mortgage payments it can also give you better mortgage terms. Done properly refinancing can save a homeowner hundreds of dollars every year.

When You Should Refinance

You should refinance your mortgage when you think you can better terms or a better interest on a new mortgage. If you believe you can lower the interest rate on your mortgage you should refinance your mortgage because this will get you lower payments.

The best time to refinance is when your credit score improves or your income increases. If your income has increased or credit score is better you might be able to qualify for a much better deal on a mortgage. In such a situation you should try and refinance your existing mortgage.

You can determine if you can get a better deal on refinancing by going to the websites of online mortgage providers. These can usually get a person a slightly better interest rate and mortgage terms.

Adjustable Rate Mortgages

One type of mortgage that you should always try to get refinanced is an Adjustable Rate Mortgage or ARM. In an ARM, the mortgage lender has the ability to change the interest rate during the history of the mortgage. This means that the interest rate and mortgage payments could increase substantially in the future.

Those who have an ARM should try to get it refinanced into a fixed rate mortgage. In a fixed rate mortgage the interest rate stays the same for the lifespan of the mortgage. If you can switch from an ARM to a fixed rate mortgage you can avoid being slapped with high interest rates in the future.

One date that those who have an ARM should be aware of is the five year anniversary of the ARM. In many of these mortgages the mortgage holder has the ability to raise the interest rate when the mortgage is five years old.

Refinancing Tips

It is a good idea to check your credit score before seeking mortgage refinancing. If your credit score hasn’t improved or has gotten worse you might not be able to get a good deal on mortgage refinancing.

One helpful tip is to see if there is anything that you can do to improve your credit score before seeking refinance. You should check your credit report for negative information and have any information that is false or inaccurate removed. Removing one false item from your credit report can cause it to rise by several points.

Another action you can take to improve your situation is to pay off a substantial amount of your existing mortgage. If you can do that it might be far easier to get your mortgage refinanced.