The last few years have not been kind to homeowners. Despite the fact that our tax dollars were used to bail out lenders in jeopardy of bankruptcy due to the fallout from the secondary mortgage market crash (which, by the way, they had a hand in creating), most homeowners/taxpayers never saw the benefit, leading to an astronomical rate of foreclosures (due to bad loans doled out by – you guessed it – the very same lenders that forced the market collapse in the first place). The point is that you’re basically on your own when it comes to finding a way to take advantage of the low, low interest rates that are the silver lining of this unfortunate mortgage debacle. And while credit issues can certainly add a level of complexity to the proceedings, they don’t have to prevent you from securing the refinancing you seek.
In fact, there are remortgaging plans specifically aimed at borrowers with bad credit. Most people dismiss these plans out of hand simply because they assume that they will not qualify. Even if your credit score has tanked along with the economy (or you have suffered bankruptcy in the recent past), you might not think that you are eligible for such a remortgage simply because you are one of the lucky few that is still employed and able to pay your bills (more or less). Don’t you have to miss several mortgage payments or otherwise demonstrate an inability to pay before you can refinance in this manner? Actually, no. The main condition in most cases is that your credit score is too low to qualify for a traditional refinance.
So the first step is to apply for a bad credit refinance. Or if you want to be thorough, ask lenders for their criteria pertaining to this type of remortgage to find out if you qualify before you apply. If it turns out that you qualify for a bad credit remortgage, you must then consider if it is worth your while. Here’s the problem: your bad credit presents a risk to lenders. Most people don’t develop bad credit by chance (although plenty of people have lost jobs due to layoffs and been unable to find work that offers a commensurate salary). In truth, bad credit is usually the result of an inability to pay. Whether that is due to bad planning on your part or circumstances beyond your control matters little to lenders. They only see that your credit score is low and that there is a higher risk that you will default on payments.
The result is that they will automatically bump up the interest rate. Although this seems counterintuitive (charging more for borrowers who are less likely or less able to pay?), the idea is probably to deter anyone who really can’t afford the loan they are seeking. So you need to determine if the higher interest rate associated with your poor credit is still low enough to justify going through with the refinancing. You probably won’t get the best remortgage rates out there (since these are generally reserved for those with excellent credit history but current financial woes), but you stand to lower your monthly payments simply by applying. So why not give it a shot?