Choosing a Refinance Loan

When you apply for bad credit home refinancing, you will have to choose among a variety of loans. Check out our refinancing loan guide to help your decision.

Fixed-Rate Bad Credit Home Refinancing

The most popular form of bad credit home refinancing is a fixed-rate mortgage. A fixed-rate mortgage offers the same interest rate and monthly payment for the life of the loan. In other words, if interest rates rise in the future, your mortgage will be unaffected. Fixed-rate bad credit home refinancing loans usually have higher initial rates than adjustable-rate mortgages (ARMs). The main draw of fixed-rate mortgages is predictability. Many customers prefer to have a consistent monthly payment and a locked-in interest rate to protect against costly fluctuations. Fixed-rate mortgages make it easier to budget because your payment remains the same each month. Here are some situations where fixed-rate bad credit home refinancing makes sense:

• Current interest rates are very low
• Interest rates are expected to rise in the future
• You find the fluctuations of your current ARM too stressful
• Interest rates have dropped considerably since you took out your existing fixed mortgage
• You want to lock in an interest rate and consistent monthly payments

Adjustable-Rate Bad Credit Home Refinancing

You can also use bad credit home refinancing to take out an adjustable-rate mortgage (ARM). An adjustable-rate mortgage usually comes with a fixed interest rate initially that lasts anywhere from one to ten years. Once this initial fixed rate expires, your rates and payments will begin to fluctuate according to market conditions. ARMs can usually offer lower rates and payments initially than fixed-rate mortgages. In the long-run, though, ARMs may cost you more money. With an ARM, budgeting may be difficult because you can't rely on a consistent monthly mortgage payment. Your payments will usually change every six months to one year. Here are some situations where adjustable-rate bad credit home refinancing makes sense:

• You expect interest rates to decline in the future
• You want the lowest possible initial interest rate on your mortgage
• You want to improve the features of your existing ARM
• You are comfortable with the prospect of fluctuating monthly payments
• You intend to refinance or move before your ARM resets (before fluctuations begin)

If you have any further questions about refinancing your home, please visit our FAQ page.