If You Have Bad Credit, Why Would You Want a Mortgage Refinance?

By Gabriel Traverso
Mortgage Credit Problems Columnist

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Many homeowners decide they want to refinance their mortgage without fully understanding why. A bad credit mortgage refinance can be a good thing for some, but a bad idea for other homeowners. Before you make the leap, take the time to understand your mortgage as well as your reasons for refinancing.

All too often American consumers make purchase decisions on impulse - they buy a new car without really understanding the loan, or they buy a new outfit they just saw in the store window. With a bad credit home loan refinance you do not want to make the same mistake. Expensive new shoes are one thing, extending your mortgage is a completely different animal. So before you decide to sign on the dotted line, ask yourself what it is you're looking for in the mortgage refinance.

Why Refinance?

Some of the most common reasons people with bad credit would want a mortgage refinance are:
  • Home improvements
  • Get out of an Adjustable Rate Mortgage (ARM) that's about to go up
  • Lower payments
  • Consolidate debt
  • Cash for a purchase

Look Before You Leap

When you start down the road of investigating options for a bad credit home mortgage refinance make sure that you have clear goals in mind, and weigh the mortgage options to make sure they will accomplish your goals. Also, whether you're looking for cash or to make home improvements take a close look at the interest rates, the payments, and how long you will be extending the term of your loan to make sure that this will really be the best decision for you. A bad credit mortgage refinance could be the best possible choice for you right now, but if you don’t really understand why you're doing it then you're likely to make the wrong move.

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