Refinancing Subprime Mortgage Loans

By Karen Lawson Columnist

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Unfortunately, the American dream of homeownership is not always easily available to those who don't have a good credit profile. Situations including low income, credit problems, recent immigration, or lack of a paper trail documenting their income are viewed by mortgage lenders as high risk.

To compensate for making risky loans, some lenders may charge very high interest rates. In order to afford payments on this type of subprime mortgage, many borrowers have taken out adjustable rate loans that are due to adjust to even higher rates, and higher payments. If you have one of these loans, a payment adjustment can make the difference between keeping and losing your home. Refinancing to a fixed interest rate or lower interest mortgage can help you keep your home.

Know the Terms of Your Mortgage

It's important to know what kind of mortgage you have, and how your payments can adjust based on the terms of your mortgage. Your mortgage documents will indicate the interest rate at the time you bought your home and got your mortgage loan. If you have an adjustable rate mortgage, your mortgage papers will also include a schedule showing when your payments will adjust. Your mortgage company will notify you before your payments go up. If the new amount is going to be too much for your budget, you may want to consider refinancing your mortgage. This means getting a new mortgage loan to pay off your subprime mortgage. If you have made your mortgage payments on time, and pay your other bills on time, you may qualify for a new mortgage loan at a lower rate. If you no longer have subprime credit, it's a good idea to shop around for a good deal on a new mortgage loan.

About the Author
Karen Lawson is a freelance writer with more than fifteen years of experience in mortgage banking. She holds an MA degree in English from the University of Nevada, Reno.

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