Why Refinance Your Home Mortgage After A Bankruptcy

Category: Finance, Mortgages.

Bankruptcy is the last step for most people who are undergoing tough financial times. Get Your Debt under Control.

Many people fear that by declaring bankruptcy they will ruin their credit for the rest of their lives, but they find that they are able to begin rebuilding credit immediately after the bankruptcy becomes final. Bankruptcy offers you the opportunity for a fresh slate with your finances. However, any years of established credit are gone as well. Your old debt will be wiped clean. Bankruptcy can be a real stress relief if you are in a desperate situation, but it is important to realize what has brought you to that point. The best way to use bankruptcy is as a learning tool. If you declare bankruptcy and then continue without changing your spending habits, you are destined to end up in a similar situation again.

Know where you lost control of your spending, and be ready to move on from there. One of the best ways to lower your expenses is to refinance your home mortgage. Lower Your Expenses. You may think that finding a lender to refinance your home mortgage following bankruptcy will be nearly impossible, but that is not so. If you have a good deal of equity in your home, you will find it much easier to refinance following a bankruptcy. Depending on your situation you may be able to walk into a bank the day after your debts are discharged by the bankruptcy court and refinance your home mortgage.

Even if you do not have a good deal of equity, you should be able to refinance your home mortgage within six months to one year from the final date of your bankruptcy. Pay all of your bills on time. While you are waiting to refinance your home there are several steps that you can take to make yourself more attractive to lenders. This includes your current mortgage as well as any utility, or other bills, student loan that you have following the bankruptcy. While credit is important, if your number one goal is to refinance your mortgage after a bankruptcy, you do not want to appear to the bank that you are in danger of falling into the same credit trap that you found yourself in prior to your initial bankruptcy. Do not attempt to open other lines of credit, such as new credit cards or lines of credit at stores.

Why Refinance Your Home Mortgage After a Bankruptcy? There are many benefits to this actually. What are the benefits of refinancing your home mortgage after a bankruptcy? By refinancing your mortgage you can lower your monthly payments in a variety of ways. While you will be considered a higher risk loan, and will not receive the lowest interest rate available, it is still possible that your interest rate may be lower than when you initially closed on your mortgage. You can extend the length of the loan or refinance at a lower interest rate, both of which will lower your monthly payment. Another reason to consider refinancing your home mortgage after a bankruptcy is that this will automatically start you on the path to repairing your credit.

The older loan, which due to the financial problems that brought about your bankruptcy may have had late payments or missed payments, is closed. The refinance will show up as a new loan. The new loan will show no late payments or penalties. Too often, people feel that the black mark left by bankruptcy is an obstacle that they cannot overcome. Where to Refinance. Rather than shopping for a mortgage, they go directly to a sub prime lender, a lender who, or worse involves themselves in predatory loan practices. Lenders who involve themselves in predatory practices, such as excessively high interest rates, or interest compounded on an irregular schedule should be avoided at all costs.

While sub prime lenders do have their place, they should not be your first choice. They will not help you. Following a bankruptcy, your first stop in refinancing your home should be the lender that holds your mortgage currently. Sub prime lenders are not likely to provide you with as low of an interest rate as you can receive from a traditional lending institution. Not only do they know your payment history, they may also, and the home save you some money in closing costs by keeping the loan" in house" . If they recommend that you come back after three to six months, which is probably the best advice. If they are not willing to refinance your mortgage, ask them what you should do to make yourself more attractive.

If they are not interested in refinancing your mortgage, don t let it discourage you, shop mortgages at other traditional lenders.