Mortgage Tips Pros And Cons Of Refinance Loans For People With Bad
Credit

Mortgage Tips Pros And Cons Of Refinance Loans For People With Bad Credit



Mortgage Tips: Pros and Cons of​ Refinance Loans for People with Bad Credit
If you’re stuck under some high credit card bills and your credit rating is​ slipping,​ one of​ the​ best ways to​ immediately improve your credit is​ a​ home equity loan .​
When the​ loan closes,​ home owners have cash-on-hand to​ pay off bills .​
the​ result: their credit rating starts to​ improve immediately.
Banking executive Dan Ambrose refers to​ those as​ the​ band-aid loan,​ also known as​ the​ 2/28 in​ mortgage lingo.
Most sub-time loans are short term loans,​ not a​ paper market,​ which means a​ fixed rate for two years then the​ loan adjusts.
He’s talking about 30 year refinancing mortgages for people with less than stellar credit .​
Lenders offer a​ home-equity loan at​ a​ set interest rate for two years,​ and then the​ loan converts to​ a​ variable rate loan,​ where the​ interest rate fluctuates with the​ prime rate at​ the​ time.
That’s the​ down-side to​ the​ band-aid loan .​
Lenders usually charge higher interest rates for people with lower credit scores .​
Dan warns consumers to​ prepare themselves for when the​ loan converts .​
Home owners could face a​ higher interest rate than the​ original home loan,​ and their monthly payments could hit them harder.
If consumers take the​ cash from their equity loan and pay-off their bills in​ full,​ after 18 months of​ perfect mortgage payments,​ Dan says the​ consumer’s credit improves to​ the​ point that now every bank will deal with them.
If you​ think a​ home-equity loan could save you​ form your creditors,​ watch out for the​ current housing market in​ your area .​
Watching the​ marketplace,​ I​ saw the​ writing on​ the​ wall,​ says Dan .​
the​ real estate values are going down .​
They’re starting to​ slow down drastically.
And there’s the​ other potential roadblock for homeowners in​ this situation .​
Lower home values means less equity and possibly not enough equity to​ satisfy their payment needs .​
If the​ equity isn’t enough to​ pay all of​ your bills,​ and after two years your payments are even higher than before,​ you​ could possibly put yourself in​ a​ worse situation.

People with marginal credit or​ no equity do have some options such as​ the​ 125% loan to​ get ahead.
A 125% loan offers you​ a​ loan for more than your home is​ actually worth .​
Talk to​ a​ mortgage professional to​ make certain the​ credit risk is​ worth the​ return .​
Dan says most importantly; use the​ equity cash to​ pay-off those bills before you​ splurge on​ your dream vacation.




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