Home Refinancing After Bankruptcy

Refinancing can be a handy tool for homeowners looking to get a better interest rate, to consolidate debts, or to make use of equity they have in their home.  Some homeowners use equity gained to finance home repairs, vacations, or other financial uses.  Homeowners who are considering bankruptcy may find home refinancing to be extremely helpful in altering their financial situation and it may help them avoid bankruptcy altogether.

For homeowners looking to refinance their homes after a bankruptcy should be sure to properly organize, research, and plan before taking action. There are several considerations to take into account that may help you get the best possible rate when refinancing your home, including repairing your credit, researching lenders and rates, and considering the use of equity.

It is recommended that individuals looking to refinance their home after bankruptcy consider waiting to refinance their home until their credit has been repaired.  It may take a few years to restore your credit to normal ratings, but patience and hard work typically results in much better rates and terms for your new loan.  Many homeowners consult credit-repair companies, attorneys who specialize in credit repair, or follow their own plan for credit restoration.  Once the homeowner’s credit rating has improved significantly, they typically have more success finding an acceptable refinance rate.

When lenders consider a refinancing application, they typically examine the applicant’s assets and the amount of money they have in savings.  Lenders are more likely to lend to individuals who have money in savings, so it is important to build up cash reserves if you are applying for a refinance loan.

Conducting the proper research on lenders and loan rates is important before refinancing your home.  Make sure to consult different lenders to find the right package and rate for you.  It is important to remember that the more inquiries that are made regarding your credit, the lower your score will be for a period of time, so make sure not to have your credit pulled by everyone you consult. Reserve the credit check for lenders that you truly intend to work with.  

Homeowners are also encouraged to consider whether or not they would like to use some of the equity in their home.  People who choose not to “cash out” any equity often find that their credit can improve.  Some homeowners see value in using cashed out equity to pay for necessary repairs or upgrades to the home, which will in turn increase value in the long run.