Bad Credit Mortgage Refinancing in 2015

Many homeowners are using their mortgages to deal with bad credit problems. Some take out new second mortgages while others are refinancing first mortgages. The average rate on a 30-year mortgage is near its lowest level since October 2005, which makes bad credit mortgage refinancing appealing.

Gerri Detweiler, author of The Ultimate Credit Handbook, says of mortgage refinancing, “Done properly, it can be beneficial.” But she warns homeowners to have their other financial fundamentals in order, and not to cash out equity via mortgage refinancing unless they can handle the larger monthly payments that could result.

The Cost of Bad Credit
In today’s world, your credit-worthiness is reflected by a single number—your FICO score. Developed by Fair, Isaac & Company, credit scores range from 300 to 850. If your score is below 620, you are in the bad credit range.

How much more will bad credit mortgage refinancing cost you than if you had perfect credit? This chart from MYFICO.com shows the different rates on a $100,000 mortgage at the beginning of 2015:

FICO score

APR

Monthly payment

760-850

5.835%

$589

700-759

6.057%

$603

660-699

6.341%

$622

620-659

7.151%

$675

580-619

8.316%

$756

500-579

9.193%

$819

If you do a 15-year second mortgage for $50,000, these are what the numbers look like:

FICO score

APR

Monthly payment

740-850

8.475%

$492

720-739

8.775%

$500

700-719

9.275%

$515

670-699

10.050%

$539

640-669

11.550%

$586

620-639

12.800%

$626

Mortgage Refinancing Advice
If you are considering bad credit mortgage refinancing, heed this practical advice from financial experts Blair Glenn and George Hanzimanolis:


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