The effects of refinancing after bankruptcy

On Behalf of | Mar 7, 2022 | Bankruptcy Law

A bankruptcy is not an obstacle to everyone who wants to recover financially. Refinancing a home loan allows you to continue receiving benefits. Refinancing gives you several opportunities to regain your financial responsibility in Pennsylvania. There are several disadvantages to consider in the process.

Pros

Refinancing allows you to reduce your monthly mortgage payments and lower the interest rates.

Another benefit is being able to obtain cash from the equity in your home. This is beneficial to homeowners who need extra funds to complete home repairs or maintenance.

It’s common to reduce the term of the home loan, reducing the amount of time that you have to pay. This is a relief to borrowers who are worried about making payments and accumulating interest over time. The sooner the loan is paid, the fewer complications the borrower has.

Cons

A bankruptcy decreases your credit score and makes your past credit problems known to lenders. Applying for certain loans requires that you have a minimum credit score. Increasing the score may be the best option for anyone wanting to refinance. Otherwise, know your bad credit options before you apply.

In addition, some refinancing plans require that you cover the closing costs. However, a bankruptcy often leaves little to no funds for costs that are generally 2%-6% of the total loan cost.

Your path to refinancing

Your path to refinancing after bankruptcy will help you save money and keep your house. Not every lender can look past your former status as a bankrupt individual or company, though. There are good and bad aspects to consider when refinancing.

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