Mortgage modifications and refinances are some of the options that might be available to struggling homeowners. Another option that may be available is a remortgage. The option of an adverse credit remortgage could have some advantages for those who have poor credit. This article looks at the benefits of an adverse remortgage.
Mortgage Refinance or an Adverse Credit Remortgage
Generally when a home is refinanced, it is accomplished using the same lender. As an example, under the Obama administration's Home Affordable Refinance Program, or HARP for short, the homeowner refinances his home with the same mortgage service provider. Other than that distinction, a refinance and a remortgage are virtually one in the same.
Consumers with poor credit ratings may be able to use a remortgage as a means to improve their credit ratings. Since a remortgage is essentially a new home loan with a new lender, the old home loan is recorded as paid in full. If there’s a history of late mortgage payments, the credit should be erased since it’s recorded as paid in full.
Once the adverse credit remortgage takes affect, it’s essential that the monthly payments be paid on time. With a remortgage, the homeowner has the opportunity to make payments on time to repair his credit rating.
Remortgage for a Lower Monthly Payment
Another benefit of a remortgage can be a lower monthly home loan payment. If the current mortgage interest rate is higher than the current rates, there may be an opportunity to substantially lower the payment amount. Extending the loan to a longer term, like a 40-year fixed term, can also lower the monthly payments.
The current principal amount can also have a dramatic effect on the monthly payment. If a large amount of the principal has been paid down over the years, the amount remortgaged could be less than the original loan. A lower principal amount translates into a lower payment. In summary, a lower payment can be realized by the following:
- lower interest rate
- diminished principal
- extended term length
In a nutshell, the two major benefits of an adverse credit remortgage are repairing the homeowner’s credit rating and lowering the monthly mortgage payment. Unfortunately, not all homeowners who have poor credit can qualify for a remortgage. Although there are other factors involved, the main factor for procuring an adverse credit remortgage is the amount of equity in the home.
Homeowners who are upside down in their homes should look at other options. One option for struggling homeowners is the Obama administration’s HAMP program. Veterans may also be able to get relief through a VA refinance program.
James Clausen - Clausen received a Bachelors Degree in Business Administration in Automotive Management and Marketing at Northwood University, graduating ...
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