It is possible, but there are only a few lenders who consider reviewing your bad credit report. Otherwise, it is difficult to switch to a better loan for your home if you are refinancing. Therefore, it is crucial to control your debt by putting efforts to enhance your credit rating. The right credit rating will create a positive impact on lenders when they see that you can borrow 80% LVR (Loan to Value Ratio).
I have gathered the following steps to teach you how you can refinance while having bad credit report.
Refinance with Bad Credit:
Your present LVR will decide that whether are eligible to refinance you an unconfirmed loan or not. The lenders look at the risk; if you have more equity, then it means lender will see less risk in your case. Usually, most lenders expect that you must have 20% equity in your property, which will allow you to borrow 80% LVR or less. But this the standard of low risk for lender. Hence, it increases your chances to refinance.
If you haven’t started yet, then here are few tips which can help you in refinance:
Copy of credit file
Getting a copy of a credit file will allow you to examine yourself from the viewpoint of lender when he has you as a customer. You must check your current credit limits, reported late payments, number of credit card you are having.
In this way, you will get a clear picture of your high and low points.
Controlling your debt
Taking control of your debt will make your case stronger. Therefore, you must figure out how much debt you have. Also, contact your provider to make a payment plan for you if in case you facing complication in paying utility bills etc.
Meet Mortgage Broker
An experienced and licensed mortgage broker can help you in refinancing. The broker will have the list of lenders and can find one who can deal with your case and review your application.
Talk to a specialist lender
You must consult with a specialist lender because they do not look at the defaults you have made. But they look at the situations in which you made those errors, which did not let you pay your debt. For example, the loss of your job, divorce, or any stressful incident. So, this way they try to help you to solve your problem.
Maintain 80% LVR
If you maintain an LVR of 80% or below, then it will take you out of the criteria of LMI (Lender’s Mortgage Insurance) which means reducing the risk from the lender.
Bad Credit Home Loans Comparison
When you think of borrowing a non-conforming loan, so there are some aspects which you must go through to see if the sudden lone is good or bad to fit on your lifestyle.
Before making a deal, you must compare the home load. If the loan you are getting has a high-interest rate, then it is a bad credit home loan.
Comparison rate shows the real cost of your home loan. Therefore, it is essential to check comparison rates. It will save you from paying high fees.
Usually, the load provider demands some extra amount in the middle of the case and borrower get surprised. Therefore, you need to get all the essential information about the payments or any hidden charges. You can also speak to the people who have previously avail the services of your provider to ask how was their experience.
You must have a good knowledge of loan repayment schedule when you choose a lender. It will allow you to play safe when you have all the crucial information about the repayments.
The above information was to compare the bad loans. With that, you also need to understand how you can manage to avoid bad loan to no get involved in the same bad position.
Following points are to successfully manage a bad credit refinance:
Avoid Tempting Feature
Many people find it troublesome to manage finances. If you are the one, then features like line of credit can be difficult for you and let you pay more. The line of credit feature will permit you to withdraw equal to value of the equity of your home.
Likewise, if you select a refinance loan which has the facility of free redraw, then you be excited to withdraw additional repayments.
Separate consolidation loans
Refinancing your home loan to consolidate bad debts (Personal loan or credit card) is possible. For this, you need to separate refinance loan from consolidated debt to manage it effectively. If you don’t do this then you will be paying your loan as well as credit cards with your home loan for the period of 20 to 30 years. And the interest rate of your home will increase much higher than the total cost of the home.