Subprime mortgages may seem like a good idea at first glance, but a couple of months – or years, depending on your loan term – later and you may have realized just a bit too late that you’re not ready to meet their requirements. Thankfully, there’s one quick way of getting out of this predicament and that’s by refinancing with a second and better mortgage.
What Are Subprime Mortgages?
Subprime mortgages are offered to people with bad credit. They’re usually the last resort for borrowers since they come with high interest rates and loan application costs. Not only that, but you’ll also be subjected to balloon payments and prepayment penalties. Of course, subprime mortgages aren’t completely bad. Since they don’t take exception to low credit scores, they could be your only means available for your financial needs.
Pay Off Your Subprime Morttgage with a Refinance Loan
Here are five quick steps to help you pay off your subprime mortgage with a refinance loan.
Step 1 Know the right time to refinance with a second mortgage.
Timing is critical and especially when your existing mortgage comes with an adjustable interest rate. The best time to refinance with a second mortgage is right before your interest rate adjusts to a higher one, before your pre-payment penalty is called in, and certainly before your loan expires and you’ll be required to make a balloon payment.
If you don’t know the answers to these questions, you can always contact your creditor and ask. Don’t worry; they won’t take exception to it. They’ll probably think you’re just modifying your budget to cover your monthly dues.
Step 2 Assess your credit rating.
Have you done anything to improve your credit rating since the last time you’ve checked? If you haven’t yet, there are many things you can work on immediately to repair your credit. Firstly, you can close revolving credit accounts that only put you in greater financial debt. Paying on time can also help.