When you are considering real estate financing and you need a home loan and your credit is not in the best standing you might want to consider getting a bad credit mortgage loan or bad credit loan.
Bad Credit Mortgage Loan
A bad credit mortgage usually has an introductory interest rate that is fixed for 2 to 3 years. This introductory rate will be quite a bit higher that the interest rate you would get on a typical conventional 30-year fixed-rate loan. Then after the initial period, the interest rate on a bad credit mortgage loan will adjust periodically.
The interest rate so much higher on a bad credit mortgage loan because if you have bad credit, the chance that you’ll default on your home loan or home mortgage is greater than someone who has excellent credit. So in order to compensate for this extra risk the lender takes, the lender will charge a higher interest rate on the loan or mortgage.
You may not have to pay this higher interest rate for 30 years because people who get a bad credit mortgage typically do so because they are trying to get their credit back into good standing. You want to make sure your monthly loan payments are made on time for two consecutive years so you can refinance the bad credit mortgage with a conventional loan at a much lower interest rate.
Fees Charged for a Bad Credit Mortgage Loan
A lender can charge you more fees for a bad credit mortgage loan or bad credit loan compared to a typical conventional home loan or home mortgage. Fees can range anywhere from 1 to 6% of the loan amount.
Although the interest rate and fees are much higher for a bad credit mortgage, most borrowers for these types of loans Melbourne don’t complain and are happy to have been able to get them. Lenders often say that after being turned down for credit many times, people seeking real estate financing with bad credit are often grateful that they can get into a home.