It is a must for borrowers to have a good credit standing when it is their first time applying for a home loan. Not only do credit scores indicate the borrowing behaviour of the applicant, they also dictate the fate of the entire mortgage application. Does the same apply when you refinance your loan?
A good credit score opens up an opportunity for you to get a great deal, which includes a competitive mortgage rate and home loan features. The better your credit rating is, the higher the chances of you getting the deal you are looking for. This is why improving your credit score is a must.
However, when you find yourself managing your home loans and other personal loans on top of your day-to-day finances, things could get complicated fast. Sudden changes in your life might put you in financial difficulty, which could, as a result, harm your credit rating. Is there a way to refinance your mortgage when your credit score is not in its best shape?
Here are some of the things you can do to help you get back on your feet and be successful in refinancing your home loan:
1. Try refinancing with your lender
Having a bad credit score will immensely decrease your chances of getting approved for refinancing with other lenders. Before you try your luck, consider working things out with your current mortgage provider first. They might be able to offer you with options that could make it a little bit easier for you to manage your loan repayments.
2. Acquire a copy of your credit file
In order for you to understand your finances better, it is crucial for you to have a copy of your credit file. This will give you an idea of the things your lender will look for when you try to refinance. Knowing where you stand will help you address your problems first, boosting your chances of getting a better deal when you refinance.
3. Make a plan
You can get bad marks on your credit file when you default on your loans, when you have significant outstanding debt, or when you get declined for many loan applications. These things serve as red flags, prompting your lender to decline your refinancing application.
In order for you to be able to succeed in refinancing, you have to make a clear-cut plan on how you can improve your credit score. One of the easiest is cutting your credit card usage and being on top of your credit card payments. But what if you are finding it a struggle to pay different loan bills each month?
4. Consolidating your loans into your home loan
The most practical way to deal with your debts is consolidating them all into your home loan. If you have a bad credit rating, do not expect to get a great deal when you refinance. Refinancing, in this case, will not necessarily help you access a lower rate or shrink your mortgage repayments. However, it will help you manage your debts by streamlining your payments.
If you do not have a chance to refinance with your current lender, research about specialised non-bank lenders that offer bad credit mortgages. They usually offer flexible packages that would better suit your current financial health.
5. Speak with a mortgage specialist
Refinancing a mortgage, whether you have a good or bad credit score, should never be done in haste. Mortgage brokers will be able to provide you with options that would fit your current situation.
Mortgage brokers have the network that can help direct you towards a lender that is most likely to approve you for refinancing. They can also guide you through the process. Get your professional advice with a home loan specialist by going to Your Mortgage Broker.