If your credit is less than stellar but you still need to refinance your home, you may have no choice but to look into one of the companies offering adverse credit remortgages. While refinancing a home loan is much more difficult than it used to be, many banks are still lending to homeowners, even those with low credit scores. While conventional wisdom says to wait until your credit score improves before applying for a remortgage, in some cases, it is simply not possible. These include instances where an existing mortgage is a variable rate instrument in which the interest rate has become disastrously high, or mortgages in which a large balloon payment is looming that will lead the property into foreclosure unless alternative financing is arranged.
In either of these cases, refinancing into an affordable fixed-rate mortgage may be the only option for saving the property from seizure. In some cases, a homeowner with poor credit may even possess a significant amount of equity in their home, even in the current depressed market, and may need access to cash for any one of a number of good reasons. In any of these cases, it would be prudent for a homeowner to attempt to refinance their home, even with bad credit.
In order to qualify for a refinancing package, a home must be worth at least 20% more than its current value on the open market. Don’t rely on what your realtor aunt told you the property was worth five years ago at the height of the bubble. Take a look at your most recent tax statement and use the assessed value of the house as a starting point. It used to be that the tax value for any given property was far below the fair market value, but in the current climate, many homes are now worth only the tax value and, in some cases, less.
The bank will generally not approve a loan until they have appraised the house and established the value for themselves, so there is no point in trying to fudge the numbers on the application. However, if there is genuine equity in the property, many banks will loan money against it regardless of your credit score.