Everybody knows that first-time borrowers need to have a good credit score to be approved for a home loan. Their credit score is an indication of how they deal with debt and how responsible they are with their finances. In fact, it’s one of the biggest considerations that lenders make when making a decision about a borrower’s loan application. But what about when someone wants to refinance their loan?
If you want to know whether bad credit can keep you from refinancing your home loan, read on as we answer your question and share some tips on how you can succeed in refinancing your mortgage.
Will Your Bad Credit Keep You from Refinancing?
There’s no straight answer to this as there’s still a possibility of you getting approved despite a not-so-perfect score. Yet, remember that you will have a much higher chance of being successful with your refinancing if your credit standing is good.
To make sure that you’ll get approved, it would be much better if you do these steps to get back on track:
Get a Copy of Your Credit File
For you to be able to better understand the state of your finances, you need to get a copy of your credit records. This way, you’ll know how it will look to your lender when they assess your application. Also, when you see your file, you will have the opportunity to improve your scores before you apply for refinancing.
Come Up with a Concrete Plan
After determining what your credit record looks like, you can work out a plan on how you can improve it. One of the best things you can do is limit your credit card usage and always pay on time and in full. However, this may not always be a possibility. If you’re having difficulties paying for different loans every month, you should try consolidating your payments, which we’ll discuss next.
Consolidate Them All into Your Home Loan
Did you know you could consolidate all your debts into your home loan? Yes, you can. However, if you have a bad credit score, you can’t expect a good deal. In situations like this, refinancing doesn’t necessarily mean you’ll have lower mortgage repayments, but you’ll still benefit because it will streamline your payments, and you’ll be able to manage your debts better.
If it’s impossible for you to refinance with your current lender, you might want to consider looking for non-bank lenders that offer debt restructuring loans. Often, they come in flexible packages that you might find suitable to your present financial state.
Talk to a Mortgage Specialist
Whether or not you have a good credit score, you should never rush your decision to refinance a mortgage. At the very least, know about your options. Speaking to some versatile mortgage brokers can also give you some ideas of what options are suitable for your specific situation.
Having a bad credit score can affect your chances of refinancing your home loan, but it’s not a definite “no.” Of course, it would be better if you can improve your credit standing, but some reputable bad credit brokers can help you find lenders that are more likely to approve your application for refinancing and guide you every step of the way.
When you’re ready to find out what the best mortgage solution is for you, count on Wealthy You to help. We are among the best mortgage brokers in Sydney that can make it easier for you to refinance your home loan. Talk to our experts today to see how we can help!