The Right Time for Mortgage Refinancing

If interest rates have dropped by a percentage point or more since you first took out your mortgage, refinancing could save you a significant amount of money. Additionally, if you have enough equity in your home so that your new mortgage is for less than 80% of your home’s value, you can eliminate Private Mortgage Insurance (PMI), which will further increase your savings.

Mortgage refinancing can also lead to lower monthly payments, depending on several factors:

• Whether you pay ‘points’ to reduce the interest rate on the new mortgage

• How much cash you take out during refinancing

• The duration of the new mortgage

• Whether the new mortgage is a fixed-rate, adjustable-rate, or variable-rate loan

“A vast majority of people close their loans, make their payments, and don’t think about it again,” says Bob Cannon of BancMortgage Financial Corp. “They don’t refinance when they should.”

Even with bad credit and higher interest rates, refinancing is typically cheaper than other forms of borrowing because the loan is secured by your home. If you use the funds wisely, you can improve your credit situation and raise your FICO score, which will qualify you for better rates in the future.

Your FICO score, tracked by the major credit bureaus—TransUnion, Equifax, and Experian—is updated quarterly and can be negatively affected by factors such as late or missed payments, bankruptcy, high debt relative to income, and credit card balances near their limits.

Fixing Bad Credit

If you're a homeowner, refinancing your mortgage can be a key step towards improving your financial situation. Here are additional strategies to help speed up the process:

• Credit Card Discipline: Reduce the number of credit cards you use, ideally to one. Use it only when necessary and pay off the balance each month.

• Credit Union Membership: If you're not already a member, consider joining a credit union. They are often a good source for loans, whether for a car or a home.

• Automatic Savings: Set up automatic deposits from your pay check into your savings account or retirement plan to ensure consistent savings.

• Avoid Credit Repair Scams: Most credit repair can be managed by yourself with some research and effort. Be wary of companies promising quick fixes.

Many homes in your neighbourhood have likely been refinanced in recent years. Now it’s your turn. For more information on refinancing options for bad credit and to get a quote based on the best current rates, visit www.badcreditmortgagerefinancingnow.com.