5 Good Reasons to Refinance a Bad Credit Mortgage
by Barbara Marquand
Under the right conditions, refinancing your mortgage can save you thousands of dollars and make your financial life easier, but refinancing isn't always the right move.
Here are four instances when you should consider home refinancing:
1. Improved Credit Score
If you have a bad credit mortgage, you're paying higher mortgage rates than what lenders are offering borrowers with good credit now. Pat yourself on the back if you've paid down credit card debt, caught up on overdue bills, and paid your bills on time recently. Check your credit score. You might qualify for a lower rate on your mortgage if your score has improved significantly.
2. Enough Time to Benefit from Home Refinancing
Don't forget you'll pay closing costs to refinance, which could add up to a few thousand dollars. Even if you can get a lower mortgage rate, refinancing might not make sense if you plan to sell the home in the next couple of years.
3. Avoid ARM Adjustments
If you're adjustable rate mortgage is about to reset to a higher rate, refinancing to a fixed rate or a lower adjustable rate mortgage could make sense.
4. Cash-out Refinancing for Home Improvements
With a cash-out refinancing, you tap into the equity you've built and take out a larger mortgage than what you currently owe. This financial strategy can make sense for home improvement projects that could increase the value of your property. Another benefit: The interest you pay on the cash is tax deductible, unlike the interest you'd pay on a personal loan.
5. Debt Consolidation--Maybe
A cash-out refinance might make sense to pay off high-interest credit card debt and other loans as long as you get your spending under control. Many financial experts advise to pay down other debts steadily instead of eroding your home equity. Remember, your mortgage is secured by your home, so if you default, you could lose your property. Taking out a larger mortgage to finance other debts could spell trouble if you're not careful.
Shop around for the best rates if you decide refinancing is right you. Get free quotes today.
Sources
http://www.myfico.com/ / http://www.kiplinger.com/ / http://www.sec.state.ma.us / http://www.smartmoney.com/
About the Author
Barbara Marquand is a freelance writer who writes frequently about mortgages and other personal finance topics.
