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Subprime mortgages might seem like a good intent at first glance, but a couple of months – or years, depending on your loan term – later and you might have realized just a bit too late that you’re not ready to meet their requirements. Thankfully, there’s one swift way of getting out of this predicament and that’s by refinancing with a second and superior mortgage.

What Are Subprime Mortgages?
Subprime mortgages are offered to people with bad credit. They’re usually the last resort for borrowers since they come with high interest rates and loan application costs. Not only that, but you’ll also be subjected to balloon payments and prepayment penalties. Of course, subprime mortgages aren’t absolutely bad. Since they don’t take exception to low credit scores, they could be your only means acquirable for your financial needs.

Pay Off Your Subprime Morttgage with a Refinance Loan
Here are five swift steps to help you pay off your subprime mortgage with a refinance loan.

Step 1 Know the right time to refinance with a second mortgage.
Timing is critical and especially when your existing mortgage comes with an adjustable interest rate. The ideal time to refinance with a second mortgage is right before your interest rate adjusts to a higher one, before your pre-payment penalty is called in, and certainly before your loan expires and you’ll be required to make a balloon payment.

If you don’t know the answers to these questions, you can always contact your creditor and ask. Don’t worry; they won’t take exception to it. They’ll probably think you’re just modifying your budget to cover your monthly dues.

Step 2 Assess your credit rating.
Have you done anything to improve your credit rating since the last time you’ve checked? If you haven’t yet, there are many things you can work on immediately to repair your credit. Firstly, you can close revolving credit accounts that only place you in greater financial debt. Paying on time can also help.

Be warned: if you take this step lightly, you might not be eligible for the ideal mortgage refinance rates. If you believe DIY credit repair tips aren’t enough, you can always ask help from a professional.

Remember as well that you’re entitled to one free credit report from apiece of the three major credit bureaus, videlicet Equifax, Experian, and TransUnion, each year. Take advantage of that!

Step 3 Establish a steady source of income.
Creditors always love people with steady sources of income; it’s music to their ears because it ensures that their borrowers will always have enough money to at least cover their interest payments.

If you want to remember for a second mortgage and eliminate your existing loan, you need to submit proof that you have a stable and steady source of income. If you are only receiving cash income, make sure to wage documentation certifying the constancy of your cash receipts.

Step 4 Assess your home’s equity.
How much of it is left? How much of it remains untouched? If you’ve used at least ninety percent of your home’s equity, you might not be eligible at the moment for the ideal mortgage refinance rates. You need to work on reducing the size of your existing mortgage before applying for a second mortgage.

Step 5 Shop, Compare, and Apply
If all’s well and ready then the only thing left to do is shop for rates, make comparisons, and submit your application

Probably the deciding bourgeois that joins a lender and a borrower is the mortgage rate.  After all, when there are choices acquirable to any consumer, a potential home buyer will more likely be drawn to the ideal (read: lowest) interest rate offer.  The lower it is, the more money they could save in the long run and the easier the payments will be.  If finding low mortgage rates on refinancing is your goal, here are a few tips you can use:

Maintain your credit.
A solid credit rating (or at least a decent one) makes you a desirable borrower.  A lender will look at you and see someone who is a responsible, reliable payer.  This means that the lender will get their money back as agreed.  As a reward for your trustworthiness, the creditor will offer you low mortgage rates in case you want to refinance.  So if getting these low rates is your goal, make sure your credit standing is in tip-top shape.

Never make late payments.
If you want low mortgage rates on refinancing, try not to miss any payments on your current loan.  Making late payments or missing any payment will raise red flags and signal your lender that you might not be reliable borrower after all.  Mortgages are built on trust and if that’s something you can't offer, no lender in its right mind will give you the time of day.  

If you’ve been a very good payer (at least for the last 12 months), you could anticipate to be on the receiving end of a low mortgage refinance rate.

Document your lock-in period.
Once you find a low mortgage refinance rate, get it confirmed through a written agreement.  You need to show proof that you have, indeed, been offered that specific interest rate.  This document will help you take advantage of low mortgage refinance rates – provided, of course, you obtain the loan within the closing period.  

Do the math.
When you’re looking to refinance, you’ll probably encounter lenders offering zero closing costs and fees.  While this might seem attractive, they might not always be good deals for you.  More often than not, these offers involve a higher amount of mortgage rates.  This will mean that you will pay more over the long term.  If you’re looking for low mortgage rates for refinancing, try to think about the total amount of your payment to determine which plans will save you money.

Think about shortening your loan period.
If your current mortgage is a 30-year loan, think about shortening it to 20 years or 15 years if you can afford it.  This will undoubtedly increase your monthly payments but you’ll save more in terms of the total interest payment over the course of the loan period.  This is because with shorter-term loan schemes, lenders give you a low mortgage refinance rate.  If you can spare the money for the monthly payment, go this route.  You’ll be free of debt in just a few years.

Be ready for refinancing costs.
A mortgage refinance is merely a brand new load you’re taking out.  If you’re looking for a low mortgage refinance rate, you’re likely to encounter costs associated with the loan.  Don’t let the low refinancing interest rate distract you from other critical components of your loan.

It’s highly likely you’ll be dealing with fees for cost of survey, appraisal, prepayment, loan origination, points, title search and title insurance and of course, application fees to cover for processing and credit report checks.
 

What is Mortgage Novation?

Mortgage novation is a legal process by which a mortal with a mortgage loan can transfer that loan to another mortal which releases the original loan holder from the liability of making the payments on the loan. ‘Novation’ is actually a term used in contract and business law that describes the act of either replacing an obligation to perform with a new obligation, or replacing a celebration to an agreement with a new party.  So mortgage novation is the replacement of the obligation to perform on a mortgage with a new indebted party.

How does mortgage novation work?

In order for a mortgage novation to work all three celebrations in the transaction would need to come to an agreement (the current mortgagee, the new mortgagee, and the lender).  This does not happen often as lenders rarely approve of these substitutions, and instead like for the loan to be refinanced.  Before you get to far into the process you will want to contact the lender directly and tell them that you want to change the ownership of mortgage by using mortgage novation. If the lender does concur to the mortgage novation then a contract is created between the debtor and the third celebration called a deed of novation, agreement to novate.

Phill Grove has conducted approximately 0M in real estate transactions – using non-traditional investing methods such as mortgage assignment, short sales, equity partnering, auction-options, wraps, swaps, and other methods – many of which he invented and/or pioneered for the industry. Phill has invented a new strategy called the Mortgage Assignment Profits System. Phill Grove has personally trained and coached hundreds of Real Estate Investors on the “12 Ways to Purchase and Sell Real Estate”, as well as marketing and lead processing strategies that actually work. Find out more about Phill at http://www.REIMaverick.com

Related Mortgages Articles

If you are in the market for a home, getting a mortgage, you probably feel, is the ideal way to go about it. What makes this a good intent is that right now, we happen to be enjoying some of the ideal mortgage rates we’ve seen in decades. But have you ever considered the difference it can make to the mortgage you end up with, to go through a mortgage broker or to go through a bank loan officer?

Walking up to a specific bank and dealing with its loan officer can be a good intent as long as you know a lot about the products on offer with different banks and lenders. You’ll know enough about which bank you want to achievement up to. If not, dealing with a mortgage broker who is a freelance agent with links to hundreds of banks and lending institutions, can be your ideal bet in finding the ideal mortgage rates the market has to offer. It’s quite the way it can be going to a website like Travelocity for the cheapest airline tickets versus directly going to the American Airlines website.

To find the lowest rates, your search needs to be relentless and it needs to deal with the way the system works. You need to hunt for the lowest interest rates and processing costs, the ideal points and the most favorable adjustment features. No attention needs to be paid to where the mortgage comes from or what kind of relationship you have with your current bank. It’s pretty certain that before your mortgage term is up, that the owner will have sold your mortgage to someone else – and you’ll find yourself dealing with a new celebration anyway.

When you finally decide on the kind of mortgage you want and the lenders you’ll be working with, take a look at the good establishment estimate, the GFE, that they give you (you did get one as you have a right to under the law, didn’t you?). Make sure that the interest rate they quote you is guaranteed for certain. Ask for what your window of opportunity with rates is. If it appears that the ideal mortgage rates you worked so hard for are at risk of rising, ask for a lock-in and get it in writing. Sometimes, they’ll give you a lock-in with a floating option. What that means is, that you don’t have an absolute lock. If rates rise of more than a certain amount though, you have endorsement against that.

The closing costs on a mortgage might be 2 to 3% of the price of the home you are going for. And it’ll include all kinds of costs – an origination fee, appraisal and survey costs, transfer tax in attorney’s fees and so on. Make sure that you know what your closing costs are. And of course, on top of all this, your lending institution will want a separate credit report fee for pulling your report. And this isn’t included in those closing costs. Make sure that you are prepared with study of the employee in the lending institution are dealing with in case you are not clear about something down the line.