Qualifying for home loan refinancing can be difficult when you have bad credit. Some specialty lenders are willing to work with people whose credit is less than ideal.
However, they expect certain things from you in exchange. The most import thing is that you commit to reducing your debt and improving your credit rating. You have a greater chance of approval if you have enough savings or equity to borrow at less than 80 percent loan-to-value ratio.
How to Improve Your Credit Rating to Qualify for Home Refinancing
You can’t clean up your credit file if you don’t know what it says. Before you even apply for home loan refinancing, request a free copy of your file from one of the major credit reporting agencies in Australia. This allows you to see your problem areas, such as late payments or utilising too much of your available credit. It also allows you to put yourself in the position of a lender.
Next, you need to pay down your existing debt as much as possible. Consider taking a part-time or temporary job and then use that income only for debt payments. You may also be able to negotiate new payment arrangements with your creditors until you can get back on your feet. After you have taken these steps, contact a specialty lender to discuss the possibility of home loan refinancing.
Consider a Debt Consolidation Loan
It’s easier to manage your debt when you make one payment to a single lender each month rather than paying several creditors. A debt consolidation loan can help you do this. This means you borrow enough money to pay back all creditors and then make one payment each month to the bank financing your loan. You may qualify for a lower interest rate on your debt consolidation loan than you have with your current credit accounts. This is true even if you have bad credit. Some people use a home refinance loan for debt consolidation.
Prevent More Bad Credit by Being Smart About Your Home Loan Switch
You will save the most money over time by separating your debt consolidation and home loans. If you roll them together, it increases the length of your loan and the interest you pay. While refinancing can improve your financial situation, don’t rely on it as a way of life. You must pay fees to receive the loan that can add up if you apply too often. Lastly, stay away from features such as the home equity line of credit if you think it will tempt you to take on more debt.