It’s probably unsurprising that if you have bad credit, you’re going to have a very hard time finding anyone who will lend money to you – especially with the way this economy looks. The question is what happens to those who have already gotten credit, possibly even a mortgage, and now find that they are falling behind and their credit score is suffering. Many of these individuals are partially trapped in adjustable rate mortgages that may be a large part of the problem. This situation is when homeowners can benefit from an adverse remortgage.
‘Adverse credit remortgage’ is another phrase for ‘adverse remortgage’. This type of loan was created to aid people whose credit ratings are poor. These people can repay what they owe on their mortgage while they create new terms for a separate loan which is more favorable to them.
This type of refinancing is not a good idea for those with good credit because interest rates and other fees will be higher than they could get under normal refinancing plans.
Usually those who are going to try to get an adverse mortgage can be separated into three different levels based on their credit reports. Those who are only a little behind in payments and have no judgments against them or bankruptcies are assigned to a low risk group.
There is the medium risk group, who have had credit problems over a great length of time, have one or more judgments against them of low value, but have no bankruptcies. All others fall into the high risk group.
The advantage of seeking an adverse remortgage lies in the fact that financial institutions who make these kinds of loans look not only at a person’s credit score, but at how the person got into credit trouble and what steps are being taken to alleviate the problem. The primary factor is how well the person is doing at making the current payments on their existing mortgage.
After the risk level of the person taking out the loan has been determined, the lender will determine what rates should be offered; these will usually include a higher fixed interest rate because of the higher risk the lender is taking. Usually, your interest rate will be relatively high, but still more advantageous to you than your current adjustable rate mortgage. If the loan taken out is large enough, then other debts may also be covered as well, lowering multiple payments into a single one.
Unfortunately, since most banks are having to be careful about how they are lending their money, it is becoming more difficult to get adverse remortgage financing. One factor that can make it easier for adverse mortgage, however, is having a good relationship with the bank that owns the current mortgage. Usually, unless you present a very significant risk to them, your bank will be very willing to help you prevent foreclosure on your property. This is because the bank is aware that the current housing market is such that they would have to incur a substantial loss in order to sell a foreclosed property. On the other hand, working with the homeowner to get an adverse remortgage will ensure that they will, eventually, make back the full amount of the loan.
