Refinancing your home mortgage following a bankruptcy may put extra cash in your pocket to help finance large home improvement projects and lower your monthly mortgage payments. On the other hand, the bankruptcy may ruin any chances of securing a low rate. In this instance, refinancing would be pointless. Before refinancing, contact several refi lenders and learn about your options.
Practical Reasons to Refinance a Mortgage Loan
Mortgage refinancing serves many purposes. The primary basis for refinancing involves low mortgage interest rates. Thus, homeowners who obtained a mortgage with a rate above 8 percent can refinance for rates around 5 or 6 percent and enjoy the savings.
The goal of refinancing is to free up money. The monthly savings could go toward investing, saving, etc. Moreover, some homeowners choose to increase the total cost of their home by obtaining a cash-out refinancing. This method entails borrowing money from your home’s equity. This is ideal for debt consolidation, home improvement projects, etc.
Improve Credit Score Before Refinancing
If refinancing immediately following a bankruptcy, the chances of getting a low rate are slim. Thus, it may be a wise choice to improve credit before applying for a new mortgage loan.
Prior to refinancing, obtain a copy of your credit report and score. Strive to increase your credit score within the next six months to one year. To do this, you will need to establish new lines of credit. These could be a secured credit card, store charge account, gas card, etc. Attempt to open three new credit accounts. Do not accumulate a lot of debt. If possible, pay off the credit cards each month.
Use the Internet to Find and Compare Refi Lenders
Several lenders offer refi loan packages to individuals with past bankruptcies. Subprime lenders and bad credit mortgage lenders have a range of loans available. To begin your search, complete an online quote request with a mortgage broker. Brokers are the easiest way to gain access to subprime lenders because they have access to many loans and lenders. After weeding through a large selection of lenders, brokers will remit quotes from four different refi lenders eager to have your business.