Mortgage Project

Bad credit mortgage refinancing is used to solve two problems of investors. This option provides solutions to people faced with different circumstances.

The first use of bad credit mortgage refinancing is applicable for those who have bad credit standing, considerable high interest card debt and a home with equity. To pay off the debts, the owner refinances his property and cashes out all the equity. This process is called debt consolidation loan.

To qualify for a debt consolidation loan, the value of the property should have become bigger for the owner to qualify for a larger loan. Ideally, the value should be high enough to pay off the remaining costs of the loan and the high credit debts of the owner.

Among the advantages of debt consolidation is that the owner can be given a longer loan term. However, it should be remembered that the success of this type of bad credit mortgage refinancing still lies on the commitment of the owner to prevent the things that led him in such an unfavorable situation. If not, the owner can even go into bankruptcy.

The second type of bad credit mortgages is applicable for those who purchased homes when they are in bad credit standing and who, consequently, were led to a high interest mortgage loan. Years after, these owners were able to recover from their bad credit standing and are now more than qualified to avail of better rates in their mortgages.

However, this type of bad credit mortgage refinancing does not necessarily translate to lower interests loans. Other factors are also being considered by the lenders or refinancing companies such as current income and remaining debts of the owner.

Bad credit mortgage refinancing of this type should be considered when the new loan package will yield the owner interests that are lower by two percent when compared to his or her current loan. The owner should also be decided to stay for three years more or longer on the loaned home.

Bad Credit Mortgages provides detailed information on Bad Credit Mortgages, Bad Credit Mortgage Refinancing, Bad Credit Mortgage Lenders, Bad Credit Second Mortgages and more. Bad Credit Mortgages is affiliated with 30 Year Interest Only Mortgages.

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There are more than 19,000 mortgage companies in the U.S. and some of the largest and most reputable of them specialize in subprime mortgage refinancing.

Steven Frank, Senior Vice President of Marketing at FlexPoint Funding identifies a subprime borrower as “someone with a FICO score below 620. He or she will pay between 1.5% and 2% higher interest for a mortgage, but there is no shortage of money or willing lenders in the subprime mortgage market.”

What trends do you see in the subprime mortgage market for 2006 and beyond?

Steve: We went through the biggest refinancing boom in history from mid 2002 through September of 2005. As many as 80% of Americans refinanced their homes during that time. Interest rates on adjustable rate loans dropped to under 4% during the boom with some homeowners opting for fixed rates as low as 5%.

Now both fixed and adjustable are back around 6.5% and will probably reach 7% for an A-grade 30-year fixed mortgage and 9% for a subprime mortgage by the end of 2006. The rate of appreciation is a more normal 6% - 12% annually. A typical home in most parts of the country stays on the market about six months, which means it’s a balanced market favoring neither buyers nor sellers.

What type of mortgage would you recommend for subprime borrowers?

Steve: Most subprime borrowers won’t qualify for a second mortgage or a home equity line of credit. They will have to refinance their first mortgage if they want to cash out some of their equity. Depending on their personal situation, a homeowner may be able to borrow up to 95% LTV (loan to value). More likely, it will be in the 75%-85% range. There are very few 125% LTV mortgages anymore, and subprime borrowers won’t qualify for these.

Subprime borrowers should work with a company that understands their particular needs; one that sees more than their past problems and that specializes in flexible, affordable mortgage solutions.

Mortgage Refinancing Advice

Check your credit - According to the government loan agency, Freddie Mac, up to 15% of subprime borrowers have credit scores that qualify them for traditional loans. Don’t settle for subprime rates if you can get prime-rate mortgage refinancing.

Watch your costs - Interest rates won’t vary much among subprime mortgages, however, there are some aspects of the loan structure that will impact the bottom line, such as:

- length of the mortgage term; 10, 15 or 30 years

- if it is a fixed-rate loan or an adjustable-rate loan

- whether any points have to be paid ( a “point” equals one percent of the loan)

- what kind of processing fees and closing costs are required

Look for good customer service - A good lender will walk potential borrowers through the application process, verifying personal information and making sure all the terms of the loan are understood. The lender will also recommend whether to lock in an interest rate during the processing phase or let the rate float until the closing.

Get a free quote - Prospective borrowers looking for refinancing can take advantage of sites like Bad Credit Mortgage Refinancing Now.

Mike Hamel is the author of three business books and several articles about mortgage financing. His material is featured on sites like Bad Credit Mortgage Refinancing Now.

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