Mortgage Refinance Bad Credit Loan - Though stricter lending requirements are well underway, the good news is that it's still possible for those with less than perfect credit to secure a mortgage refinance bad credit loan.
The caveat is that you can expect closing cost fees and interest rates to climb steadily higher the lower your credit score is. Consider the fees and rates carefully when evaluating whether a bad credit mortgage refinance is in your best interest.
Should you refinance?
How long do you plan on staying in your home? For a standard home mortgage refinance, it will take approximately two years to recoup closing costs, but for a bad credit mortgage refinance the timeframe is closer to four years. If you plan on staying in your home long enough to recoup closing costs and fees and reap some financial benefit, refinancing may be worth your while.
What interest rate can you secure?
Interest rates are driven by credit score-the lower your score, the higher your rate. Credit scores in the 760-850 range qualify for ultra-low interest rates, but even with a score as low as 660, you may still be able to secure a low rate. If your credit score is below 660, anticipate a .5% interest rate increase for each 20 point drop. If you currently have an adjustable rate mortgage (ARM) that's set to adjust, it may be beneficial to refinance at a fixed interest rate even if you don't qualify for rock-bottom rates.
If you are refinancing with bad credit, it's imperative to shop around with multiple lenders to see who can offer the most favorable terms. While a traditional bank or mortgage broker may not be able to accommodate those with less than perfect credit, there are bad credit mortgage lenders and brokers who will be happy to help. As with any loan, be sure to have a thorough understanding of the fees and terms before you sign.