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YOUR CREDIT:
• Credit History – is a tracking of every purchase and payment you have made on a credit card, loan, mortgage or utility company for example. If you do apply for a loan and are rejected, this is also on your credit history records.
• Credit Check – any time you apply for a mortgage, your lender will do a credit check to see if you pay on time, if you have gone bankrupt, what credit cards you do have, repossessions, accounts turned over to collections, and if you have never used your credit that is also a problem because there is no history and you may, once approved, rack the credit up available.
• Eliminate Credit – before you apply for a mortgage, get rid of your credit and cancel accounts that you are not using. There are options to help you with this such as debt consolidation which provides much lower interest rates than most major credit cards.
BAD CREDIT MORTGAGES:
High Interest Rates and Credit History:
For mortgage brokers, lending money is always risky but even if you do have bad credit this allows for the lenders to charge at an even higher rate and as such depending on your situation, they may decide to take a chance on you if they feel that they will in fact get their money back. Higher interest rates in this case are mutually beneificial for both the lender and the borrower over time, as mortgage payments accrue, a borrowers mortgage credit history may improve considerably and reversely, the lender generates significantly more money than they would have received from mortgages with lower interest rates.
Short Term Mortgage Solution:
For those with bad credit who have been approved for a high interest rate mortgage, selecting a short term mortgage is best. The borrower would have to renew in a couple of years for example, giving them the opportunity to benefit from lower interest rates. Usually, loyalty to the same financial institution that is charging at a highter rate will not be recognized and so most borrowers have to shop around. Remortgaging, or changing where you hold your mortgage, provides you the opportunity to then reduce the rates on your mortgage if your credit history has improved with your consistent mortgage payments, saving you thousands of dollars in the long run.
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