To refinance a mortgage with bad credit is going to be tough. I am not going to even sit here and try to lie to you. As property owners, no matter if you are an investor or single home owner with a 40 year mortgage, you have to know that credit is everything when you are purchasing these large assets. After all, it is the first indicator to the lender of your worthiness of repayment.
Refinance Mortgage with Bad Credit
The truth of the matter is that is is most likely that you will not be able to refinance your mortgage with bad credit. I know, bad news, and I hate being the barer of bad news, but you don’t have some options still in this light.
The banking industry has taken some huge losses over the past 24 months and they are bound to take more. But, what does this have to do with you and your situation? Well, it is simple really. Most people are under water as they call it, meaning that they owe more than the property is worth, so refinance isn’t an option with another bank. Plus, you already have an existing mortgage with this bank so why not deal with them first.
Alternatives to Refinance Mortgage with Bad Credit
1) Talk to your bank - Tell them the truth. Let them know that this loan is not working for you and if you have a balloon payment coming that you will not be able to pay it cause refinancing is out of the question. Tell them your credit is bad and you have no other options but to deal with them. If they have you in an high interest rate, try to get it down to something that you can manage. The bottom line is that the banks have taking in so many properties as a result of foreclosure that they don’t want another one, so they may be open to working with you.
2) Sell the property - I know you are thinking, how can I sell property that is under water? It doesn’t make any sense, but it does if you know a few things. For example, you can ask for the bank to accept a short sale on the property. This means that the bank will accept less than what is owed on the property and accept it as payment in full.
You are thinking, why would the bank take less than what is owed on a property? Simple, they better get something for the property now because if it goes into foreclosure, then they won’t get anything and it will end up costing them money to maintenance it, secure it, pay insurance, and more on the property that is making them nothing. Thus, a short sale is an option and you will find that more and more banks are open to this option.
At the end of the day, your hands are tied trying to refinance a mortgage with bad credit, but you do have options.
