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 mortgage refinance?
What To Consider Before Seeking Bad Credit Mortgage Refinance
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
comparison.
About the Author
This bad credit mortgage article was written by Roy Thomsitt, owner author of the website http://www.eliminate-credit-card-debt-now.com>http://www.eliminate-credit-card-debt-now.com
Written by: Roy Thomsitt
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