In the midst of the present economic turndown, many people are looking for something to help them get through this difficult period. One of the financial offerings which is helping many people, is a bad credit mortgage. This financial vehicle helps those with a bad credit rating to regain some of their lost financial status, as well as the opportunity to hold onto their home. This article provides more information about this.
An overview of bad credit mortgages
Bad credit mortgage
A bad credit mortgage (also known as adverse mortgages) is a mortgage loan which is designed to pay off an outstanding mortgage. The purpose behind this 2nd mortgage is to provide the mortgagee with an opportunity to pay off the original mortgage under new, less financially strenuous payment terms.
What is the bad credit mortgage used for
There are several financial issues which can be remedied with these remortgages:
• It can help to pay off an outstanding mortgage.
• It can help the mortgage holder to retain their house.
• It can help to reduce other outstanding loan repayments via debt consolidation, whereby various loans are rolled over in this mortgage. Benefits of refinancing mortgages • It can reduce monthly loan instalments.
• It can consolidate all existing debt into one payment.
• Some of money can be used for personal use.
• The interest rate is fixed.
• A bad credit rating can be remedied.
Things to consider before taking out a bad credit mortgage
Bad credit mortgages also have their downside; for a start, there are costs involved. For instance, there will be remortgaging fees. A second cost consideration is the knock-on effect on a longer mortgage. Often, remortgages will stretch out the loan repayment period over a longer period of time. While this may allow for easier repayments, the number of extra years will make the loan more expensive in the long run.
Other disadvantages include:
• Early redemption penalty: If the existing mortgage is a fixed one then a penalty of several months’ repayments will apply.
• Read the fine print: Not all financial institutions have the mortgage holders best interest at heart. Prior to taking out a remortgage, scrutinise the fine details in order to make sure that the loan is a really going to help, both now and in the long run. • In some cases, an early repayment may incur more fees and costs.
Consequently, it is important to be confident in the long term implications of the remortgage. Once it is taken out, the mortgage holder will have to live with the consequences, whether they are good or bad.