One of the main reasons that people refinance their mortgages is to reduce the interest rate that they have to pay. This can get a little bit complicated if you have bad credit. You may find that it is indeed possible to lower your interest rate, or you may find that your rate winds up being higher. This is going to depend in large part on your particular situation.
Your credit scores will have a fairly large impact on your refinance rates but not as much as you may think. Certainly there will be less of an impact than there was when you first got the mortgage. The reason for this is the equity that you have in your home. This equity means that the risk for the lender is quite a bit less than it was when you first applied for the loan. As a result you will find that your credit score impacts your interest rate less than you would think.
That being said there will still be a penalty for having a higher interest rate so you are going to want to try to keep your credit scores as good as possible. There are a lot of things that you can do to help your scores; in many cases you can do them in a very short time. This would include things like closing accounts that you never use and paying down your credit cards. Because your credit score will have an impact on the interest rate that you pay when you refinance you do want to make sure that your rate is as good as possible.
While the impact of your credit score will be fairly minimal on the interest rate that you have to pay you do have to keep in mind that even small differences in the interest rate will add up to thousands of dollars. This is something to think about when you are refinancing if you have bad credit. Having an interest rate that is one percent higher may not seem like much but it will actually cost you thousands of dollars over the length of your mortgage.
The biggest issue that you are going to have when it comes to refinancing with bad credit is not so much the interest rate but actually getting the loan. This is especially true right now with so many lenders being scared off by all of the foreclosures that have happened recently. You should be able to find a lender who is willing to work with you but it will probably not be from one the big banks. Instead you will likely have to go with one of the lenders who specializes in bad credit refinancing. The best way to find these lenders is to get a mortgage broker to help you.
