Taking Out a Second Mortgage Bad Credit Loan
Is your credit score about to go below 650 or even 600? If you are going through a layoff or some other work interruption or other financial turmoil, your car payments are probably also behind, and your credit cards are likely to be at or near the limit.
Credit scores give banks a way to apply some uniformity to their decision-making when it comes to approving or denying loan applications. A low credit score means different things, depending on the person behind the score. It can mean a person who currently has gone through car repossession. He’s probably got maxed-out credit cards and is a month or two (or more) behind on his payments on those as well.
Finding a second mortgage bad credit loan can be especially difficult because banks are often leery to take the junior position on a mortgage if your credit is spiraling downward. The good news is that if the bank is telling you can’t get a second mortgage to refinance with bad credit from your bank, Amansad Financial can help.
We have helped many people keep their home with second mortgage refinancing through a number of different sources. We use our connections with two different tiers of lenders to get our clients the funding they have worked hard to deserve. The traditional banks, with their rock-bottom interest rates, are known as the “A” market. However, we have relationships with the “Alt-A” or “B” market lenders as well as private lenders, also known as the “C” market. “Alt-A/B” lenders charge a rate of interest slightly higher than the “A” lenders, because they accept credit scores that are lower (and represent a higher risk).
Private lenders don’t put as much weigh on an applicant’s credit score, which makes them a popular solution for people who have managed to sock away a sizable down payment and make progress bringing their credit accounts current but have a credit score that is lagging behind their progress. From the perspective of the private lender, the risk is higher, and so you can often expect to pay around a 10 percent interest rate on the note. However, the upside is that you get into your home purchase sooner. Because private loans only have terms of a year or two, you’re only paying that higher interest rate for a short time. If necessary, you can renew the loan in some cases, or make interest-only payments, leaving the principal unchanged while you devote more money to getting your finances in shape.
Get A Second Mortgage To Refinance With Bad Credit
So how does this work? A private lender would look at how much equity you have in the house. If you bought the house for $700,000, but it’s appreciated in value to $750,000, here’s how the calculations would go down. Assume that you’ve paid off $150,000 in principal, bringing the balance owed down to $550,000. You actually have $200,000 in equity because of the increase in the appraised value. However, you’re pretty close to the line if the lender wants an LTV of 75 percent, because you have just under 26 percent equity in the house. If you find a lender who will work with an LTV ratio as high as 90 percent (common in the desirable parts of the larger cities in western Canada), then you only need to retain $75,000 in equity after the loan, so you could borrow as much as $125,000 in a second mortgage.
How can Amansad Financial help you? We have relationships with Bad Credit Second Mortgage Lenders who will work with homeowners to provide as much LTV as possible, and we have helped many clients in western Canada get second mortgages in order to access equity and take care of financial emergencies. The best time to start applying for that sort of financing is before you absolutely have to have it. So you definitely want to start applying as soon as possible. Amansad Financial has second mortgage specialists who can help you with all of the paperwork and explain how all of the scenarios would work. Your home is likely your largest financial investment, and making sure that you don’t lose it to foreclosure when financial times get tough is a must. Let us help you, just like we have helped many others in western Canada to keep their homes and advance their financial security.
It can also mean a person who went through bankruptcy almost a decade ago as a result of being downsized from his mid-management career. Bankruptcies stay on your credit report long after most people have cleaned up their monetary situations and can keep that score lower than the borrower’s actual financial picture. Many people who have gone through personal struggles several years ago, ruining their credit in the process, have later recovered to do quite well. However, their credit scores don’t rise as quickly as they would like.
Can You Refinance A Second Mortgage?
Trying to refinance second mortgages when you have more then one is more complicated than it is when you just have one. If you have taken out a second mortgage, you can refinance it, but be prepared for some higher fees and a longer approval time than it took to get your first mortgage.
The reason for this is that when refinance your second mortgage, many times lenders will pressure you to accept a resubordination. The second mortgage holder wants to move up in terms of priority into first position, and a resubordination can accomplish that. If the second mortgage holder is giving you a hard time, you might think that you’re stuck paying that mortgage off over time, or consolidating both of your loans with that second mortgage lender, or just walking away from the refinance altogether.
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How To Refinance Second Mortgage
A lot of people looking at refinance go through resubordination, but it’s important to look at the requirements before you get into that. Lenders have to submit that subordination package to the bank that holds that second mortgage, and that bank will want around $100 to take a look at the package. You’ll end up waiting as long as six weeks just to get a response.
Resubordination requests generally go through eventually, unless property value questions come up. The loan-to-value ratio is a key metric in this situation, which can mean that the lender runs a new appraisal on your property. If values have been trending upward, this generally won’t pose a problem, but if there have been a lot of short sales or foreclosures recently in your community, that can pull your values downward, and then you can end up with no approval for that second loan refinance.
So if you want to refinance a second mortgage, but the lender denies your application, what can you do?
Amansad Financial has helped many people develop creative solutions to financing issues surrounding their homes. If you’ve come into a new position at work that is paying you more money, and you want to pay off that second mortgage sooner, that can save you a great deal of money — unless you’re in a closed loan, which would charge you interest differential fees if you pay it off more quickly — then we can help you.
Let’s say you took out an second mortgage that was closed (not allowing early repayment without penalty). Your first mortgage, though, is open. The balance is higher than the balance on your second mortgage, but you think you could pay the whole thing off within three or four years now. Amansad Financial can connect you with private lenders who will replace your first mortgage, offering you a renewable two-year term on your new loan. The rates are likely to be a bit higher, but since you’ll be paying things down much more aggressively, even if you can’t quite get the whole thing paid off in the two years, you have that option renew or take out a new open loan at the end of the two years. That second mortgage, which was closed, remains in place, but you can invest your ready cash in other vehicles in order to start building more wealth in that way.
Refinance second mortgage options
If your second lender says no to refinancing, another option is to go to your first mortgage holder and ask for a consolidation of the two loans. You’ll want to look, of course, at the requirements for lending and the closing costs before signing any new paperwork. Most lenders treat a refinance as a new loan application, and if the bank has elevated its requirements as far as credit score, but your credit score is still below that new minimum, you don’t qualify for refinancing.
When it comes to closing costs, every loan application and scenario are different, so you’ll want to think about whether applying for the refinance will even save you any money. If you have a relatively low balance on a closed mortgage, the best use of your money is often to stick it out and make the payments until you are done. After that, when those payments aren’t coming out of your budget, you’ll have more financial flexibility.
To get the best perspective on your second mortgage refinance situation, talk to one of Amansad Financial’s refinancing specialist. We have many different ways to improve your financial flexibility and help you get the best financing at the most favorable rates and with the lowest fee structure.
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