How Can I Repair Bad Credit By Refinancing My Mortgage?
With interest rates as low as they are, many people are looking to refinance their mortgage to save hundreds of dollars per month in excess interest charges. While this could be a great way to save money, another advantage of refinancing a mortgage is that it could be used to repair your credit if it is bad.
Pay Off Defaulted Mortgage
The first way that you could repair bad credit by refinancing your mortgage is by paying off your defaulted mortgage. When you refinance your mortgage, you will get a whole new loan. That loan will be used to pay off your existing mortgage. If you are behind on payments on your existing mortgage, then you will become current on that loan following the refinance. That should immediately improve your credit.
Pay Off Other Debts
The second way that you could repair bad credit by refinancing your mortgage is by paying off other debts. When you refinance your mortgage, you could use the equity in your home to get cash out proceeds. The cash out proceeds can then be used to pay off other debts, such as credit cards and other unsecured debt. This will then lower your outstanding debt and repair your bad credit.
Start Fresh
The third way that you could repair bad credit by refinancing your mortgage is by starting fresh on a new mortgage. When you get a new mortgage, the loan will start with a fresh slate. Over time you will be able to keep the slate clean by making all of your mortgage payments on time. Over time your credit will reflect the payments and your credit score should increase.
*Affects pricing. With the No Closing Cost
Option, borrowers finance the closing costs instead of paying for them at
closing. Borrowers who pay closing costs at closing may qualify for a lower
interest rate. Some upfront fees (ex. credit report and appraisal) may apply
and may be credited at closing.
*Refinancing or taking out a home equity loan or line of credit may increase
the total number of monthly payments and the total amount paid when compared to
your current situation.
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