Mortgage Tips: Pros and Cons of Refinance Loans for People with Bad Credit
If youre stuck under some high credit card bills and your credit rating is slipping, one of the best ways to immediately improve your credit is a home equity loan. When the loan closes, home owners have cash-on-hand to pay off bills. The result: their credit rating starts to improve immediately.
Banking executive Dan Ambrose refers to those as the band-aid loan, also known as the 2/28 in mortgage lingo.
Most sub-time loans are short term loans, not A paper market, which means a fixed rate for two years then the loan adjusts.
Hes talking about 30 year refinancing mortgages for people with less than stellar credit. Lenders offer a home-equity loan at a set interest rate for two years, and then the loan converts to a variable rate loan, where the interest rate fluctuates with the prime rate at the time.
Thats the down-side to the band-aid loan. Lenders usually charge higher interest rates for people with lower credit scores. Dan warns consumers to prepare themselves for when the loan converts. Home owners could face a higher interest rate than the original home loan,...
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