If you have a less that perfect credit score and are considering trying to refinance your mortgage, the current economic climate has made it a little easier for those with bad credit to get loans. When preparing to apply for a remortgage there are a few things you should know about the process.
One of the common misconceptions about remortgage loans is that they are like a second mortgage. This is not true, a remortgage is actually a new mortgage taken out on the property and the funds are used to replace the existing mortgage. You are, in effect replacing one loan with another, usually at a better rate of interest.
When applying for a bad debt remortgage the process is quite similar to the process you went through for the initial mortgage. The property that you want to refinance will have to go through the same checks that it did for the original loan, you will have to have the property reassessed and it will have to be re-inspected and meet all of the requirements set out for an eligible property, set out by the lending company.
You will, however, have to go through the bad credit remortgage search process that will assess your eligibility for securing the loan. This is not to say that you won’t qualify for a remortgage if you have a less than perfect credit score, it just means that there will be some extra criteria that you will have to meet. Most lenders will require you to have a minimum amount of equity built up in the property before they will approve your application. The amount of equity is typically 10% for most companies.
Seeking out a refinancing loan for your property is a good way to lower your overall debt load and to reduce your monthly payments. If you have more than the required amount of equity built up in your property you might also want to consider taking some of that out in the process – this can be used to pay off other outstanding debt you might have such as credit card debt.