How to Decide about Bad Credit Mortgage Refinance?
It is a common financial habit among most of the households. People are now acquiring multiple debts: one for a car loan, another for a department store; on one side they are handling a bank loan and on the other side they have got several credit cards with them. In the beginning all seemed to be manageable, but as the time passes, you realize that you cannot pay your monthly payments on time. Due to the reason that you have to fulfill any other financial need you miss out a payment or two, and as a result you have a bad credit record. And then if a few more payments are missed by you, you will start to feel the pressure of debt payments, so before that happens start thinking about refinance.
The thing to be considered now is that, in asset terms you are not poor. You have got a home of your own with plenty of equity; it is mortgaged. Now don’t you think that it would be great if you could get a new loan in order to consolidate your monthly payments of previous loans and get your finances back in order? Well, maybe, you think, but can you get bad credit mortgage refinance?
So what are the things that should be considered before seeking bad credit mortgage refinance?
Don’t ever think that any mortgage refinance package is something to be taken lightly, but rather than to take it lightly you should have a careful thought about the costs, consequences, and whether or not it is really necessary.
Things to Consider
Following are the things that you should consider before refinancing your debts through unlocking the equity in your home.
Do You Really Need It?
First of all, you have to make sure that you really need it or not? You should analyze your outstanding debts in detail. Make their list, total the amounts owed and total your monthly payments. The cheapest and simplest way to get out of this debt will be to manage your current finances without resorting to new and probably expensive, borrowing.
- Now find some other ways to clear those overdue amounts. Have a look at your current home budget, your expenditure, find out any unnecessary expenses that can be cut out or reduced. Doing this makes sure that the money that you have saved by reducing expenses goes towards reducing at least one of the outstanding debts where some amount is overdue. If there are several overdue debts that you have to pay, and you need a few months to clear them with your newly released funds, you should inform the concerned credit companies about the steps that you are taking to pay off the overdue amount. That will release a little bit of pressure, while you get things in order again.
- You should now seriously think about your financial situation and you yourself should find out ways to make some extra money. If you have a few weeks of overtime to payoff debts, then is it enough for you to clear the overdue debts and allow you to get your finances in order again? Is there any possibility that you can use one of your skills to earn some extra money part time? You should keep in your mind that, if you take no action at all, it will have an adverse effect on your financial situation. If there is a possibility of taking some action by which you can pay off your debts without resorting to bad credit refinance, then the chances are it is worth doing.
- Take a look around the house. Have you got anything that you do not use, but are worth selling to clear some of those overdue payments? Have you got some old shares that you could sell, or an old savings account, with a healthy balance in that you’ve not used for years? If you have any such things then they can also help you to clear your overdue payments.
Alternatives to bad credit mortgage refinance
You should also consider the other alternatives to bad credit mortgage refinance, especially a debt consolidation loan. Search the internet or visit some consolidation loans providers to have few quotes for consolidation loans, compare the results with a bad credit mortgage refinance option. Don’t forget to make a note of the costs of each of the loan options, as this may affect your decision. Riegelwood Credit Union offers a variety of excellent loan options for you to explore.
Other Ways to Pay your Debt
Up till now you have gone through all the possibilities of paying off your debts without resorting to a new loan or refinancing. If you think that none of the above ways can help you, or they are insufficient for you to pay the overdue debts, then now it is the time to consider mortgage refinancing. Again, you need to search through the internet or by visiting different mortgage refinancing providers in order to get more than one quote. As you have a bad credit record, some lenders may try to charge more money from you than what is really justified. You have the right to get the best deal possible. You should take a very close look at the charges of the lender and broker, record them, and use them in your calculations so that you may decide the best suitable option to go with.
Debt Consolidation Vs. Bad Credit Mortgage Refinance
What you have to do finally 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.
Mortgage refinance costs
Actually you are comparing between the mortgage refinance costs, interest rates and repayments based on the best quote you have with you and your current mortgage plus the costs of the consolidation loan. It is important to do this comparison, 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 then, that is not a problem, ask a friend who can help you in this regard, or there is also a possibility of getting free counseling from someone who can help you to make the right choice.
Finally make a decision
Once you have all the figures noted down in front of you, the choice will probably be clear. Remember, however, that if you are choosing the option of keeping your existing mortgage and having a separate debt consolidation loan, once that consolidation loan is at the end of its term, say 5 years, you will no longer have any repayments. This is the reason that it is important to look at the whole mortgage period to make a comparison.