How To Refinance Mortgage With Low Credit Score

By Sean A. Kelly

Home refinancing is a natural part of life. Almost everybody goes through it for many reasons such as to obtain funds to refurbish or remodel the home or to convert the home equity into cash to be used for other pressing reasons. However, it may not be easy to refinance mortgage if you have poor credit history or low credit score. Generally, your credit score is considered poor or low if it is below 600. Creditors may be likely to consider you a high risk debtor and will be stricter in reviewing your application for a home refinance. This may not necessarily mean that you have no hope whatsoever to be able to refinance mortgage with your low credit score. There are ways for you to work through in order to qualify for a mortgage refinance.

Before you ask if you actually can apply for a mortgage refinance, perhaps you might want to first ask yourself if you should apply for a mortgage refinance. Sometimes refinancing your home when your credit score is low might not be a smart move especially if your credit score is now worse than when you first applied for your current mortgage. This is because the better rates are often reserved for debtors with good or excellent credit scores. But if you find yourself in a very dire financial situation it might still be possible for you to be able to lower your monthly payment and save money by extending the term of your mortgage. Of course it is advisable for you to engage mortgage refinance help specialists to have them assist you in doing so. You may need to disclose a lot of information about your credit situation but they need to know more in order to help you get a better picture of how the situation may be like once your refinance your home.

Since you have low credit score, your situation might be different from others with better credit history. Therefore you may have to go through a different route in order to find the best refinance mortgage deal for your particular situation. First of all you might need to enlist the help of a mortgage advisor to lay out all possible options for you to decide upon. They might also be helpful in providing advice along the way.

You might want to consider an interest-only mortgage refinance plan if you believe you might be able to dig yourself out from your current financial situation within the next 12 months. By doing so, you will only be required to pay on the interest for a certain period of time and not on the principal of your mortgage. The risk is that you will still owe the entire amount of the principal once you have finished paying off all the interest. This is why this particular option should be taken only if you are sure that you could break out of your financial problems before you have to start paying on the principal amount of your mortgage.

Another viable option may be for you to look at a traditional cash-out refinance plan where you might be able to refinance your home based on its current market value. You may be allowed to pull out part or all of your equity but you will have to have your house appraised and this may work to your advantage only if your home has appreciated in value since your original purchase. You might also want to check with your creditor if you would be allowed to purchase points to reduce your interest rates but this option may be viable only if you intend to remain in your current home for more than a few years. You may want to keep in mind that refinancing your home may leave any equity that you have built up over the years vulnerable because it will be used to secure your debts.

In any circumstances, it is advisable that you consult a credit counselor for advice on improving your credit scores and on refinancing your current debts. Bear in mind though that this may not be a quick solution to your financial problems but it may be a good step in the right direction for you in the long run.

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