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Is Refinancing An Option After Bankruptcy?

Are you about to go through bankruptcy or have you already experienced a bankruptcy? If you have, then you will definitely have some concerns for your financial future. It is important to understand if refinancing is an option after bankruptcy when you are considering your financial future. You will need to know when it is possible, what considerations need to be taken, how you will be able to refinance, and how it will impact you.

Refinancing After Bankruptcy

It is possible to refinance after bankruptcy. It is best to wait until you have improved your credit scores or before companies realize you have just filed for bankruptcy. Some companies will tell you that you should refinance before six months have passed after your bankruptcy while your credit report is still reflecting a fair score. Those who have been through a bankruptcy realize it is important to wait for refinancing after a bankruptcy. This means you will wait until your credit report improves, as well as obtaining a credit card, not to use, but to have as a reflection of credit. You will also want to pay all of your bills on time to help improve your credit report.

Considerations for Refinancing and how you will be able to Refinance

There is a lot to consider when you are refinancing and your credit score is just a small part of that. You may have to wait until your credit score improves, and the bankruptcy will no longer affect your ability to get a fixed rate loan. Typically, lenders who see a bankruptcy and poor credit will only offer high monthly payments, high interest, and an adjustable rate mortgage when refinancing. If you already have a fixed rate loan and have been making the payments on time, you will want to wait on refinancing; however, if you have an adjustable rate mortgage that will soon become too much in monthly payments, you may need to refinance. If this is the case, you will need to consider the affect of the bankruptcy as well as the penalties of the previous adjustable rate mortgage. Some adjustable rate mortgages will have a prepayment penalty for three years, with the first two years being at a fixed interest rate. The third year typically begins the interest rate changes every six months. Your adjustable rate mortgage may also have a balloon attached to it. Once you have revisited your original mortgage and answered a few questions, you may find refinancing is the best option.

How Refinancing Will Impact You

When you are looking to refinance, you will need to be aware of the impact it will have. First having a lender look at your credit report will cost your points, lowering the score you have worked hard to rebuild. If the bankruptcy is still showing on your credit report, you may find your monthly payments and interest rate higher than others with a better credit score. There are also costs in refinancing you will need to consider. Depending on your credit report you may have to bring closing costs to the closing to refinance.

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