Do you want to refinance your mortgage but think it’s not possible because you have bad credit? Think again. Having bad credit means you won’t get the lowest interest rates or the best loan terms. However, qualifying for a mortgage refinance may still be possible.
Mortgage Refinance Strategies to Keep In Mind
Here’s a look at 5 mortgage refinance strategies that you can use if you have bad credit.
Tip #1: Check your credit report and fix any errors.
If you have a less-than-perfect credit history, you should get a copy of your credit report, check everything, and make sure that it’s accurate. This way, lenders can base their assessment of you as a borrower on correct, up-to-date information.
Tip #2: Pay down your other loans.
Before you apply to refinance your mortgage with a lender offering home loans for people with bad credit, make sure to pay down your other loans. Paying down debt can improve your credit score because it can lower your debt-to-income ratio and increases your available balances.
Tip #3: Add a co-signer with good credit.
A co-signer with good credit can help you secure a refinance. Lenders look at both the primary borrower, as well as the co-signer’s borrowing profile when they issue loans. So, if your own credit score isn’t good enough to qualify, adding a co-signer with good credit can help your chances of approval.
Tip #4: Work with your current mortgage lender.
In some cases, your current mortgage lender may be willing to refinance, even if you have bad credit. In your application, focus on other factors that prove you’re a trustworthy borrower. Proving that you have a stable income and keeping the same job for several years are both ways of guaranteeing you’ll pay. Showing that you have substantial savings can also help.
Tip #5: Maintain your credit score.
Even if your credit isn’t good, make sure you’re not worsening your credit score. Avoid missing payments to creditors, maxing out any existing cards, or applying for new credit cards. Take the time to organize your bill payments and leave your credit card(s) at home as much as possible to avoid making any financial mistakes that could impact your chances of being approved for a refinance.
The Bottom Line
It’s possible to refinance with bad credit, so if you’re looking for a mortgage loan with better terms, you could be in luck.
Before you make your application, review your credit report and be responsible with your spending. If you’ve been rejected by a lender in the past, you don’t have to panic. Refinancing your home with bad credit is definitely possible, even if you have to work a little bit harder. Just make sure to keep the abovementioned mortgage refinance strategies in mind.
If you need more help, don’t hesitate to reach out to me. I’d be happy to help!
Will Bell Mortgage Broker is a mortgage and finance broker based in Melbourne specializing in residential home loans. Will is all about the average Australian understanding just enough of the broader economy to take action on your own personal economy. He is the host of the My Personal Economy Podcast which you can check out here.
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