Bad Credit Mortgage Refinance - Financial institutions have tightened their lending standards in recent years, making it more difficult for those with bad credit to refinance.
The good news is that it's possible to secure a home loan refinance even with bad credit; the bad news is that you can expect the costs to be progressively more expensive as your credit score drops. Considering the higher fees associated with a bad credit mortgage refinance, the question may not be whether you can refinance, but whether it will be worthwhile for you to do so.
Should you refinance?
Interest rates are determined by credit scores, so the lower your score, the higher rate you'll pay. With tighter lending standards securely in place, you might find it difficult to refinance into a lower fixed rate than what you currently have, especially if your credit score is low. Also, if your credit report reflects missed mortgage payments, it's likely that you won't be able to refinance at all.
ARM and Interest Only Loans
If you currently have an ARM that's about to adjust to a higher rate, it may make sense to refinance your mortgage with a fixed interest rate even if you don't qualify for the lowest APR. In spite of the higher interest rate and closing costs, a refinance would likely present a much better financial scenario than the dramatic spike in payment spurred by the ARM interest adjustment.
What interest rate can you anticipate?
Higher credit scores translate into lower interest rates, with the best rates reserved for those with credit scores in the 760-850 range. While it's possible for a credit score as low as 660 to quality for a low rate, the rates will increase dramatically - as much as a half of a percent for every 20 point drop - for those with scores below 660.
As with any loan, be sure to shop around with multiple lenders to determine which can offer the lowest interest rate and most favorable terms. If traditional lending institutions aren't able to accommodate your refinance, a mortgage broker or lender specializing in bad credit loans may be able to help.