Pulling the equity out of your home, whether for paying bills, taking a vacation, or for another investment, can be done with good credit, or even if you need a bad credit refinance. The process of refinancing starts with an appraisal of your home by the mortgage company, or the company being used for the refinance. Based on the appraisal value, a maximum refinancing amount is determined.
Bad Credit Refinance
Refinancing a home doesn’t have to mean an exorbitant future payment. For a homeowner without excessive negative marks on their credit report, a favorable financing rate can be acquired, minimizing the increase of the monthly payment. In some cases, the payment is lowered despite the increased amount owed on the loan, due to a lower finance rate. These same opportunities will be non-existent or difficult to find for a homeowner looking for a bad credit refinance.
The homeowner with poor credit may still benefit from pulling cash out of their home, assuming the money is used to pay down debts and clean up their credit score. Stopping negative credit reporting from appearing on the report will quickly change the individual’s credit score. Within a matter of months, bad credit can improve enough to reapply for a better loan when the time is right.
A bad credit refinance may be beneficial to the homeowner for another reason; the original loan had destructive terms written into it. There are many reasons the home loan could have been a bad situation to get into. If it was interest only, an ARM (adjustable rate mortgage,) had a very high interest rate to begin with, or needed a second mortgage to create a loan package that would be approved. A bad credit refinance in this case may turn out to be a marked improvement, allowing the homeowner to keep their house at a better, fixed interest rate loan.