Subprime Mortgage Refinancing

Get Rid of Your Subprime Mortgage

Subprime mortgages may seem like a good idea at first glance, but after a couple of months – or years, depending on your loan term – you may have realized you’re not ready to meet their requirements. Luckily there’s one quick way of getting out of this predicament and that’s by refinancing with a second and better mortgage.

What Are Subprime Mortgages?

Subprime mortgages are loans that are offered to borrowers with bad credit. They’re usually the last resort for borrowers since they come with high interest rates and loan application costs. You’ll also be subjected to balloon payments and prepayment penalties. Now they aren’t completely bad. Since they don’t take exception to low credit scores, this could be your only means available for your financial needs.

Pay Off Your Subprime Morttgage with a Refinance Loan

Here are five quick steps to help you pay off your subprime mortgage with a refinance loan.

Know the right time to refinance with a second mortgage.

Timing is critical and especially when your existing mortgage comes with an adjustable interest rate. The best time to refinance with a second mortgage is right before your interest rate adjusts to a higher one, before your pre-payment penalty is called in, and definitely before your loan expires and you are required to make a balloon payment.

If you don’t know the answers to these questions, you can always contact your creditor and ask.

Assess your credit rating.

Have you done anything to improve your credit rating since the last time you’ve checked? If you haven’t yet, there are many things you can work on immediately to repair your credit. First, close revolving credit accounts that only put you in greater financial debt.

Remember that you’re entitled to one free credit report from each of the three major credit bureaus, namely Equifax, Experian, and TransUnion, every year. Take advantage of that!

Establish a steady source of income.

Creditors always love people with steady sources of income because it ensures that their borrowers will always have enough money to at least cover their interest payments.

If you want to qualify for a second mortgage and eliminate your existing loan, you need to submit proof that you have a stable and steady source of income. If you are only receiving cash income, make sure to provide documentation certifying the constancy of your cash receipts.

Assess your home’s equity.

How much of it is left? How much of it remains untouched? If you’ve used at least ninety percent of your home’s equity, you might not be eligible at the moment for the best mortgage refinance rates. You need to work on reducing the size of your existing mortgage before applying for a second mortgage.

Shop, Compare, and Apply

If all’s well and ready then the only thing left to do is shop for rates, make comparisons, and submit your application!

Refinancing