Bad Credit Refinancing: Making An Informed Decision

Refinancing as a way to improve a bad credit situation is nothing new. What is new is the range of refinancing options now available to homeowners. Here are the three most popular types of non-traditional bad credit mortgages:

1. Interest-Only Mortgages allow homeowners to pay only the monthly interest due on the loan for an initial period of time, usually from three-to-ten years. After this, the payments go up to cover both principal and interest for the rest of the mortgage term.

2. Negative Amortization Mortgages can have even lower initial payments because they let borrowers pay less than the interest due on the loan, with the unpaid balance being added to the principal. This means the amount owed on the mortgage actually increases rather than decreases over the years.

3. Option Payment ARMs let homeowners choose the type of monthly payment they want to make. The options include an interest-only payment; a minimum payment that does not cover the principal and interest due, (see above); or a payment calculated to pay off the mortgage in either 15, 30, or 40 years.

Fixed-Rate or Adjustable-Rate Refinancing

CNNMoney.com senior writer Jeanne Sahadi points out that, "Rarely has there been such an advantageous time to refinance into a 30-year fixed-rate mortgage if you have an adjustable-rate loan. But homeowners' love affair with riskier ARMs is still strong . . . One in three homeowners refinancing today is choosing the financially riskier interest-only and payment-option ARMs, according to data from Loan Performance."

Learn how to save money on bad credit refinancing and get a free loan quote at Easy Second Mortgages. Find out how much you could be qualified to borrow and what your monthly payments might be. The information you provide will not be shared or sold but will only be used to prepare your free quote.