Homeowners looking to lower their interest rates or monthly payments on
their current mortgage may consider refinancing as one option to reduce the
stress of a strained monthly budget. If you’ve had an unfavourable credit
history, you may be wondering, "Is refinancing my house with bad credit
possible?” The answer is yes and the amount available for you to borrow from
mortgage providers depends on the details of your history and the amount of
equity you currently have locked in your home.
What Is Considered a Bad Credit
Your credit score is a numerical score ranging from
300 to 850, with most banks considering anything below 650 an unfavourable
candidate. Your score is calculated by companies such as the Fair Isaac Company,
or FICO for short. They look at your payment history on loans and lines of
credit to determine whether you are a low- or high-risk candidate to lend to. If
you aren’t sure what your current credit score is, you can obtain a free report
from a national credit bureau such as Equifax Canada or TransUnion Canada.
How Does a
Bad Credit Score Affect My Chances of Getting Refinancing?
With traditional banks, refinancing your mortgage
with a bad credit score is unlikely to happen. This is because banks are
conservative lenders and only consider candidates with a stable history of
borrowing and payments. However, private lenders and mortgage providers are
willing to lend to those considered high risk based on their history details
and the amount of equity they have available.
How Can I Get
My Mortgage Refinanced with My Current Credit Score?
Your best bet is to book a consultation with a
mortgage specialist. They will be able to provide you details on what you are
able to borrow, the lowest available interest rate, and other terms you will
need to meet. Don’t let your past affect your future. A bad credit rating stays
on the records for up to 7 to 10 years, but if you are able to start adding new
accounts and make regular payments, your report will begin to look more
favourable over time. You may also want to take the time to speak to an expert
about debt consolidation and credit repairing techniques.
What Are Some
Advantages to Refinancing My Mortgage?
Depending on the terms of your current mortgage,
refinancing may allow you to access better interest rates based on current
market conditions. This in turn will allow you to spend less on paying interest
and more on building equity. In addition, refinancing can help reduce monthly
payments by extending the terms of your mortgage. If you find your budget is
constantly stretched to its limits, this may help ease your mind and your
bills. On the contrary, if you find yourself with new income potential and
looking to pay off your mortgage sooner, refinancing can help decrease the
length of your mortgage and save you in the long run.
Is refinancing my house with bad credit possible?
Yes. Take the time to obtain a current credit score report and consult with a
mortgage specialist to determine if refinancing is your best option.