Refinancing for a Lower Rate

First, you have very high interest rates and you are doing the proper homework to prepare for refinancing for a lower rate.

Unfortunately, given the circumstances you have described, I cannot think of an effective way for you to lower the interest on your second mortgage. In general, the only way to lower the interest rate on a mortgage is to refinance the current, higher-interest mortgage loans into a single loan with a lower interest rate.

Refinancing may not be a viable option for you for several reasons. First, you said that you may be hit with penalties (called pre-payment penalties, or "pre-pay") for early refinance, which could make a refinance untenable at this time.

Also, it sounds like you borrowed 100% of your home's value in order to make the purchase. These two facts, coupled with the length of time you have owned the home, mean that you likely have little equity to work with. Given your credit score, the bankruptcy, and the small amount of equity in the home, you will likely find it difficult to find a refinance lender willing to offer a lower interest rate than you are already paying.

Although you will probably not be able to lower the interest on your second mortgage at this time, you should start planning now to improve your future financial prospects. First, you should contact your mortgage lenders to discuss the early refinance penalties. Find out the exact amount of the penalties and when you can refinance without penalty; plan to refinance as soon as you can do so without incurring penalties. Between now and then, you should work to improve your credit score so you can refinance at the lowest rate possible.

First, pull a copy of your credit report from the three bureaus and make sure that all information being reported is accurate; if you find any incorrect listings, you should promptly dispute them with the bureaus. Try to pay down the balance of any outstanding credit accounts to between 25% to 50% of the credit limit, and continue to make your payments regularly and timely; delinquencies can kill your credit score. Hopefully, by the time you are ready to refinance, your credit score will have improved enough that you will qualify for lower interest rates than you are currently paying.

However, if you think that your financial prospects are solid and your debt-to-income ratio or other factors have improved, it might not hurt to just apply and see if you can qualify for a much lower interest rate.

Bills.com makes it easy to compare mortgage offers and different loan types. Please visit the loan page and find a loan that meets your needs at: /mortage/refinance/

I hope that his helps you make the right decision for your particular situation, but be sure to shop around and find a loan that meets your needs.

If you would like more information, please visit our mortgage resource page at: /mortgage/

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Best,

Bill

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