California Refinancing for People with Bad Credit

By Karen Lawson
Mortgage Credit Problems Columnist

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California homeowners who've owned their homes for several years have typically amassed large amounts of home equity. It may be possible to use your home equity to refinance your mortgage loan for the purpose of paying off consumer debt. If you have bad credit, refinancing your mortgage can help by providing funds to pay off consumer debt.

Bad Credit Refinancing: Finding the Right Loan

Refinancing means taking out a new home loan for enough to pay off your present mortgage and your other bills. Whatever your situation, if you have enough equity in your home, you may be eligible to refinance your mortgage to pay off your consumer loans and credit card accounts. After refinancing, your mortgage payment will probably be higher, but it may be lower than the combined total of your monthly mortgage payment, credit card and loan payments--and you likely will be paying much less interest. Additionally, the interest you pay on your new home loan may be tax deductible, while interest paid on consumer debt is not.

Shop for the Best Refinancing Deal

Mortgage lenders may charge higher interest rates or points (a portion of the amount of your loan) to borrowers with bad credit. As with the popular TV game show, you don't have to take the first deal--especially if you've paid your mortgage on time and have a lot of equity. Equity is the difference between what you owe on your home and what it's worth. In the case of a bad credit mortgage, your lender will likely pay close attention to your income, employment, and the amount of home equity you'll have after your refinancing is completed. As a California homeowner, chances are good that you have enough home equity to solve your credit problems.

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