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A Bad Credit Home Loan Refinance May Not Be the Best Option

By Gabriel Traverso
Mortgage Credit Problems Columnist


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Refinancing your mortgage is not always the best option to handle the debt you might be battling right now -- especially if you have bad credit. Explore all of your alternatives before you apply for a bad credit mortgage refinance. There may be a better way to accomplish your short-term goals.

Getting a mortgage refinance is not necessarily a bad thing, even with bad credit. For example, if you have an adjustable rate mortgage that's about to reset to a high rate, and if your credit isn't suffering from anything in your recent past, getting a mortgage refinance could be the perfect solution. If you have bad credit and are fighting with credit cards or other debt you might be considering a home loan refinance to solve your immediate problems.

Credit Counseling and Other Options

Can you borrow money from friends or family? It may seem a silly suggestion but this could be wiser than sacrificing your equity over credit cards. Credit counseling services can help you consolidate your payments and possibly lower your interest rates. Are there monthly expenses you can cut back on? Look hard at your monthly budget to see where you can cut the fat.

Lenders Will Work with You

Once you tap into the equity in your home it's gone. You might have cash in hand to pay off your debt, but it could be years before you get that equity back--and you're extending the time it takes to pay off your debt. If you can make it through your short-term debt problems without a mortgage refinance, imagine having that equity waiting when you're back on top. If you have a pressing emergency and no other options, there are enough programs and sub-prime lenders that you should be able to qualify for a home loan refinance despite your bad credit.

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