In the past few years, many people have experienced a decrease in their pay and a rise in their debt. Credit cards are maxed out; homeowners are behind in their payments; two income families have been reduced to one. Where is the light at the end of the tunnel? When will the burden of money troubles be lifted? Well, you can start improving your finances with a bad credit remortgage.
A Debt Relief Solution
For many people, a remortgage is the only reasonable solution to the bad economy. No one wants to claim bankruptcy and lose all of their assets. Living out on the street is not a viable alternative. So, in order to save their homes, individuals are visiting financial institutions and requesting a remortgage of their property.
Generally, homeowners will want to shop around, when considering the option of bad credit remortgage. In some cases, your current lien holder will consider restructuring your loan, so the payments are more affordable. But, most of the time, the knowledge that you are having financial difficulties will only heighten their awareness and put you on their radar screen. So, it is best to shop around, ask questions, and see what financial institution is willing to give you the best deal.
Two Ways to Benefit from Bad Credit Remortgage
Remortgaging your property is a scary proposition. Chances are, you are floundering in uncharted territory. You do not really know the outcome of your search for financial relief at this point. You are feeling desperate. However, there are really two ways that your current money troubles can be eased by remortgage:
1. Lower house payments
2. Consolidated loans
When the economy was better, taking on a mortgage did not seem to be a problem. The money is coming in to pay the bills, and you have the chance to build up some equity and enjoy the fruits of your labor. But, the family budget can go south in the blink of an eye, if a two-income family suddenly becomes one, businesses start issuing pay cuts, or you get laid off of your job. Then, that house payment is looming overhead.
Now it is time to consider refinancing your home. Maybe you can go to another lender and get a better deal on interest rates. But, since you are already facing a bad credit rating, it will more likely mean reconfiguring the loan for a longer period of time, at a higher interest rate.
For example, right now your mortgage is for 10 more years. A lender may be able to stretch the life of the mortgage to 15-20 years. The interest rate may be higher; but, the repayment period is 5-10 years longer. So, the monthly payments are actually less than what you are paying right now.
Getting your Bills Together
A bad credit remortgage is also useful for consolidating your debts. Think about it. Most people have multiple credit cards, with 16-25% interest rates-or higher. If you do not know how that adds up, look at the finance charges on your last statement. Then, look at the minimum payment required. Every month, you are paying very little toward the actual balance of the loan. Most of your money is going to interest. If you stop to figure it out, you will take the rest of your life to pay off some of these cards, and that is assuming you do not charge another dime.
However, a bad credit remortgage can use the equity you have already built up in your house, in order to refinance your loan. If you have enough of your property already paid for, it can give you a tidy sum of money to pay off those credit cards, the car loan, or any other debts you can get paid.
In truth, you still have the same amount of debt; but, it is all consolidated in your new house payment. Instead of having 15 different bills, maybe you only have 10 now. In addition, even though you have sacrificed the equity in your home, and your interest rate has gone up to an average of 7.3%, it is still a lot cheaper than the exorbitant interest rates of all of those credit cards. More of your money is actually going toward the money you borrowed, instead of the extra charges.
No want wants to take out a bad credit remortgage. But, when the economy is lousy, it is better than the alternative. Instead of being out on the street, you can refinance your home for more affordable payments, or use the equity to consolidate your loans and get the family budget back on track. The decision is yours.