Bad Credit Mortgage Refinance - Should I, Shouldn't I?
It is a common financial scenario across households in the
Western world. Multiple debts have started to build up: a car
loan here, a department store loan there; a bank loan here and
several credit cards there. While all may have seemed manageable
on the optimistic day you took them out, or spent on them,
suddenly you realise that you cannot keep up with the monthly
payments. You miss out on a payment or two, and suddenly you have
a bad credit record. A few more missed payments and you start to
feel the pressure, so start thinking about refinance.
The silly thing is, in asset terms you are not poor. You have
a home of your own; it is mortgaged, but you have plenty of
equity. Now wouldn't it be great if you could get a new loan to
consolidate those monthly payments and get your finances back in
order? Well, maybe, you think, but can you get bad credit
What To Consider Before Seeking Bad Credit Mortgage
Any mortgage refinance package is not something to be taken
lightly, nor without careful thought about the costs,
consequences, and whether or not it is really necessary. What,
then, do you need to consider before refinancing your debts
through unlocking the equity in your home?
1. First of all, you need to make sure it is really necessary.
You should take a long hard look at your outstanding debts. List
them out, total the amounts owed, total the monthly payments, and
total the amount in arrears. Your cheapest and simplest way out
will be to put your current financial house in order without
resorting to new, and possibly expensive, borrowing.
a. Look at some ways to clear those overdue amounts. By taking
a critical eye to your home budget, your expenditure, see if
there are any regular expenses that can be cut out or reduced. If
so, take the necessary action and make sure that money goes
towards reducing at least one of the outstanding debts where some
amount is overdue. If you have several overdue debt repayments,
and it will take a few months to clear the outstanding amounts
with your newly released funds, write to the credit companies
concerned and tell them what steps you are taking to pay off the
over due amount. That may take the pressure off you a bit while
you get things in order again.
b. Seriously consider how you can make some extra money. Will
a few weeks' overtime, if available, help you clear the over due
debts and allow you to get your finances in order again? Could
you use one of your skills to earn some extra money part time?
Remember, if you take no action at all, your financial situation
will deteriorate. If it is possible to take some action that will
eliminate your overdue debts without resorting to bad credit
refinance, then the chances are it is worth doing.
c. Have a look around the house. Do you have any things you do
not use, but are worth selling to clear some of those overdue
payments? Do you have some old shares that you could sell, or an
old savings account, with a healthy balance in, you've not
touched for years.
2. You need to consider the other alternatives to bad credit
mortgage refinance, especially a debt consolidation loan. Look
around and get a few quotes for consolidation loans, ready to
compare the results with a bad credit mortgage refinance option.
Remember to make a note of the costs of each of the loan options,
as this may affect your decision.
3. You have now looked at the possibilities of paying off your
debts without resorting to a new loan or refinancing. If that
came up blank, or insufficient, then now is the time to consider
mortgage refinancing. Again, you need to shop around and get more
than one quote. With a bad credit record, some lenders may try to
get more money out of you than than is really justified. You have
the right to get the best deal possible. Look very closely at the
charges of the lender and broker, if there is one, and record
them, ready to use them in your calculations to decide what
option to take.
4. The final stage is to make a comparison between using bad
credit mortgage refinance and using a debt consolidation loan.
Really, you need to do this over the full term of the mortgage.
What you will actually be comparing is:
The mortgage refinance costs, interest rates and repayments
based on the the best quote you have had, with your current
mortgage plus the costs of the consolidation loan. This is
important, as the bad credit mortgage refinance loan may be at a
higher interest rate than your existing mortgage. If you are not
good with figures (many people are not so don't feel bad about
it!), ask a friend who is to help you out, or if you can get free
counseling from someone who can help you make the choice.
Once you write down all the figures, the choice will probably
be clear. Remember, however, that with the option of keeping your
existing mortgage and having a separate debt consolidation loan,
once that consolidation loan is at the end of it's term, say 5
years, you will no longer have any repayments. That is why it is
important to look at the whole mortgage period to make a
bad credit mortgage article was written by Roy Thomsitt,
owner author of the Eliminate Credit Card Debt Now website.
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