There are a lot of reasons for exploring mortgage refinancing. Some of those reasons include; requesting more equity, seeking out a lower mortgage rate, consolidate debt, consolidate mortgages, paying out arrears, existing bank not willing to renew, etc. (among many others as well). Mortgage refinancing is actually a positive thing as it opens up many more doors for you at a time where you might need options, and that time is likely going to be around the maturity of your existing mortgage. Options are good to explore and you should never settle with your existing bank if they’re not extending help to you, especially in a time of financial need.
Bad credit will not stop you from refinancing your mortgage. In fact mortgage refinancing can be done with both ‘A’ banks or alternative lending institutions. It’s true, the rate will be higher with an alternative lender, however with the help of a knowledgeable broker/agent, they can help you understand whether the solution works within your goals and whether the savings offset the costs. Understanding the exit strategy or short term 2-3 year plan is also crucial (keep this is mind when speaking with your broker!).
So, what tips can we share when mortgage refinancing with bad (or even good) credit? Here are some important tips that we can think of:
Mortgage Refinancing Tip #1: Make sure your existing mortgage(s) are up to date! Arrears have a very negative impact on the overall experience. Banks will either be reluctant to lend, while others may flat out refuse right from the get go. An even better tip is; do whatever you can to stay current for at least the 6 months leading up to the refinance!
Mortgage Refinancing Tip #2: Try very hard not to take out large debt prior to the refinance. This includes; larger lines of credit, car loans/leases, additional mortgages, etc. Whatever you do AFTER the refinance will have no effect on the efforts of the refinance therefore bettering your chances… unless of course the large debt is intended to be consolidated within the new mortgage.
Mortgage Refinancing Tip #3: For the self-employed applicants… please please please deposit income into your personal/business bank statements if you can. Since banks are looking for bank statement deposits (usually 3-6 months to be exact) rather than tax documents for income verification, it helps to see money going into the account. Collecting cash and storing it under you mattress only helps you in the short term!
Mortgage Refinancing Tip #4: Do not accept/start a new job 1 week before the expected closing (as an example)! I get that employment may be a hard thing to control… when you are given an opportunity you must take it! However, starting a new job during the process, or even weeks before you intend on refinancing, may complicate the process. The new bank needs to ensure that you’re not on a probationary period or in a job within an entirely different field than the last 5 years of your previous employment. It doesn’t make it impossible to refinance, but it just raises more questions.
Sure, there are some things you need to know before mortgage refinancing. It may not be as simple as deciding to do it, and then do it. Many home owners don’t think about these things, but rightfully so. We’re here to help, not just with the mortgage refinance journey, but everything leading up to it as well. With time comes knowledge, and we’ve gained a lot of knowledge working with many different banks/lenders over the years… learning and understanding what they want to see… learning and understanding what they don’t want to see… so on and so forth. We have the tips and guidance for you!