The debt burden in America is rising, leaving significant financial losses, home foreclosures and bankruptcies in its wake. According to the latest Census statistics, the average American is $8,100 in the hole. While many mortgage holders are doing their best to tread water in our current ocean of debt, still others are opting to refinance their mortgages to take advantage of the lowest recorded mortgage rates in history.
If you are a struggling mortgage holder desperately trying to catch up on bills, reduce your overall debt and improve your credit score, you may have considered mortgage refinancing as a viable way to get yourself back on your feet.
However, as you know, things aren’t always that simple. A person with bad credit seeking mortgage refinancing is considered a “high-risk” borrower and may not qualify for the low rates that make refinancing now an advantageous solution for most. While refinancing always comes with a cost, your bad credit history may land you in the high-risk, high-cost category of subprime borrowers, meaning you may qualify for a higher interest rate and have to pay significant upfront costs.
The good news is that if you have built up equity in your home, you can use that boon to your advantage when seeking a bad credit home mortgage refinance loan. By qualifying (even for a high interest rate) with a lower principal amount, you may be able to obtain a substantially lower monthly payment and alleviate some of your month-to-month costs.
Debt Consolidation Refi
If you are like most consumers, you have accumulated substantial debt in credit cards, auto loans, home equity loans, student loans and lines of credit. With debt consolidation refinancing, you are able to combine all of your debts into one new mortgage. This gives you the flexibility of only having to pay one monthly payment. In addition, since the interest on a mortgage is often tax deductible, you are able to benefit from tax deductible interest on all of your debts. Often, debt consolidation refi also lowers your monthly payment because while you are adding to your overall debt burden, you are refinancing your home for a lower principal amount than the original. This allows you to extend the loan periods of your high interest bills and roll them into a mortgage with a lower interest rate.
Weigh the Pros and Cons
Your approach to mortgage refinancing should take into consideration your current financial state as well as your financial goals. Why are you seeking a bad credit home mortgage refinance? Many mortgage holders consider refinancing an option when they are trying to avoid significant financial distress (like foreclosure or bankruptcy), want to finance a large expense like college tuition or home improvements or are trying to pay off higher interest bills (like credit cards). In addition, the lower monthly payments attract many mortgage holders who are struggling to make ends meet.
Since mortgage refinancing does add to your overall debt burden, you need to be diligent in your research and evaluate your financial situation to determine what benefits are most important to your financial future. Utilize the resources on my site to help you weigh the potential benefits of refinancing against the costs and determine whether it is a viable way for you to get back on the right financial track.
Save Money by Playing the Game
If you are a mortgage holder who has fallen behind on bills, possesses a “high-risk” credit score or is facing bankruptcy, you may not qualify for the lowest mortgage rate and you may have to invest more in mortgage refinancing than your good-credit neighbors. However, there is a way you can save money on refinancing your mortgage. Did you know that your mortgage company is rewarded for overcharging you through what is called “Yield Spread Premium”?
With the help of my free Underground Mortgage videos, you will learn all of the dirty tricks mortgage lenders play to obtain unnecessary kickbacks that come directly out of your pocket.
Register for my 6-part online video series to learn how you can SAVE THOUSANDS OF DOLLARS every year.
My name is Rob Regehr and I’m a personal finance writer with a chip on my shoulder for banks and brokers that take advantage of my friends and neighbors.
