By Karen Lawson
Mortgage Credit Problems Columnist

Refinancing your mortgage can potentially lower your interest rate, and may provide additional cash for paying off bills and other expenses. If you have bad credit, you may not qualify for the lowest interest rates, but refinancing into a bad credit mortgage may provide lower payments and/or additional funds for paying off debt. Here are four reasons to consider refinancing, even if you have bad credit.

• Refinancing may offer cash for debt consolidation: If you have enough home equity, you may be able to refinance for enough to pay off outstanding credit card balance, medical bills, and other debt. Although credit is harder to come by if you have bad credit, you may be able to get cash out refinancing if you have enough home equity.
  
• Refinancing may provide potential income tax benefits: If you consolidate debt through bad credit mortgage refinancing, you may gain potential tax benefits and deductions. Consult an income tax professional for more details.
  
• There can be a psychological benefits: Making one monthly payment for your new mortgage instead of several payments for your mortgage, credit card, medical and other bills can help you stay on track financially. And managing your balance through one payment can help you focus on bringing that one balance down, taking your mind off the burden of debt caused by excessive bills.
  
• Bad credit mortgage loans can help improve your credit: If you can refinance to for enough cash out to pay off credit card debt, you'll be in a position to concentrate on paying down your mortgage loan. Paying extra toward your principal each month will help reduce the balance faster, and will help to raise your credit score. Eliminating high credit card balances can also help improve your credit. Generally, it's a good idea to keep account balances below one third of your credit line for each account.

A good place to start is to ask your current mortgage lender about refinancing. But enter any discussion informed, and the best way to do that is to compare bad credit mortgage refinancing lenders - it's critical to getting the best deal. If you've kept your mortgage payments current for the past few months, you may qualify for a bad credit mortgage loan with better terms than your current mortgage. There's no harm in asking, and you might be pleasantly surprised!

 

Other Recommended New Home Loan Articles

• Home buyer classes: How to educate yourself on financing and ownership
• How to make sure you can afford your mortgage
• Loan types for borrowers with poor credit