Carrying a mortgage is both a privilege and a burden. It is a privilege because it means that you are the proud owner of a home - something that not everybody can say these day. And, it is a burden because with that pride of ownership comes financial responsibilities. Namely: you need to make your mortgage payments each month.
One of the best ways to save money on your monthly household expenses is to reduce your monthly mortgage payments as much as possible. If you are the holder of both first and second mortgages, the smart path to a reduction in your expenses is through mortgage refinancing.
You may have considered refinancing before but have held back given your bad credit score. It is true that having a poor credit score could have a very negative effect on your chances for a low-interest refinance loan. However, if you know how to go about it, you can actually find excellent mortgage refinancing deals despite your score.
For someone who is looking for a good deal on refinancing their first and second mortgage with bad credit, here are 5 good pieces of advice:
1. Loan consolidation into a single first mortgage is probably your best move:
When refinancing two mortgages at once, your best move is most likely to consolidate everything into a single loan. Why? Because, you will almost certainly pay a lower interest rate on a first mortgage than on a second.
2. Calculate your current total monthly interest payment across both mortgages:
To be able to compare refinancing offers, start by figuring out how much money in monthly interest payments you are paying now. Simply add the interest portion only (note: be sure to exclude the portion that goes toward your principal) of your first and second mortgages together.
3. Look for interest rates that beat your current average rate:
Now, figure out what interest rate you will need in order to beat the new rate. Note that it may be the case that you could end up paying a slightly higher rate on your first mortgage than you have now, but you could still come out ahead with your new loan in terms of total interest paid.
4. The best portal to a new loan is through a bad credit mortgage lender:
Keep in mind that your best route to a refinancing loan is always going to be via a bad credit mortgage lender. Given your bad credit score, you should definitely limit yourself to only working with such lenders. They will know how to evaluate your creditworthiness in innovative ways that other lenders cannot do.
5. Choose to apply to at least five lenders:
Make sure that you apply directly to at least five bad credit mortgage lenders. This will help widen your options as you go after the right loan offer.
In the end, it is all about getting the same thing you have now (your home) for less money (lower mortgage payments). Refinancing can be just the thing to help - even if you have a bad credit score.
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