How to Refinance a Subprime Loan

Subprime loans are typically for people with unique or poor credit. If you bought your home with a subprime mortgage, refinancing your loan might lower your monthly payment. It's important to educate yourself on the process and obstacles you'll face if you've just recently improved your credit.

Instructions

Difficulty: Easy

1. Submit an application to your bank or mortgage lender. They will review your credit, the value of the property and your income. This will at least let you know where you stand even if they cannot qualify you.
2. Examine the Good Faith Estimate and the Annual Percentage Rate (APR). The Good Faith Estimate will show what you are paying to refinance and the APR will show you the actual rate you're paying after financing your costs. You may determine that it is better to keep your current loan.
3. Evaluate any deal you are offered against the finance charge and total cost. If you're financing in other debt, take your total current payment and compare what your new payment would be. If your overall monthly outgoing payments are better, then you're saving money.
4. Call your current lender and see if they can refinance you with lower fees. If they cannot help you, ask to be transferred to the home retention department to see if you qualify for a term or rate modification.
5. Investigate ways to improve your credit if you don't qualify. Ask for a copy of your credit report and a list of the exact reasons why you don't qualify.

Tips & Warnings

• You can also get a free credit report from Annual Credit Report online.
• Use an online calculator to measure how making extra payments affects your principle balance so you can qualify in the future.