For homeowners with bad credit, getting a second mortgage can be the first step to getting out of debt. A second mortgage is a loan that is taken out in "second position" on a property that already has a mortgage. There are loans with fixed rates, loans with rates that change over time, and home equity lines of credit (also known as HELOCs). When you need all the money at once, fixed-dollar-amount mortgages are the way to go. A HELOC is a line of credit that can be used as needed up to the loan's limit.
Second mortgages for people with "bad credit"
The Equal Credit Opportunity Act makes sure that you have the right to credit. You can't be turned down for credit because of your race, gender, marital status, or country of origin. But your credit score will determine how much money you can borrow and how much interest you will have to pay.
It's easy to get credit, but it's hard to keep track of. If you don't use it right, all three of the major credit bureaus will give you a low FICO score. In general, a credit score of 680 or higher means that you have good credit. Scores in the range of 680 to 620 are still good, but they will make lenders think twice before giving you money. If your credit score is 620 or less, you have bad credit.
Here are some signs that you are getting close to having bad credit:
- You have to get new credit cards to pay off old ones. This moves your debt around, but doesn't get rid of it.
- Each month, you can only pay the minimum on your loans and cards.
- All of your cards and accounts are maxed out.
- If you need to borrow money, you have to get a subprime loan.
Getting your finances in better shape
Getting a second mortgage with bad credit can lower your FICO score at first, but it can also help raise it in the long run if you pay off high-interest debts with the money. This new loan doesn't help you get out of debt; it just changes how your debt is set up so you can get back on your feet financially. The interest you pay is tax-deductible, which is a nice bonus. The IRS says that joint filers can deduct up to $100,000 in mortgage interest.
Sites like www.badcreditsecondmortgages.com make it easy to shop for and compare bad credit second mortgages. The application process is quick, private, and doesn't require you to do anything. Interest rates are still low, but they might go up in 2006. Now is a great time to see if a second mortgage is a good financial move for you.
