Refinancing your mortgage can save you money through lower interest rates and smaller monthly payments. You can also choose to cash out all or part of your equity to pay off bills or to remodel your home. But which lender is best for you really depends on your credit.
For those with near perfect credit, a prime lender is your best choice for finding a low rate. But for those with some credit problems or who want flexible loan terms, then check out a sub prime lender for competitive financing.
Benefits Of Prime Lenders
Prime lenders usually offer the lowest rates with the lowest fees, but only to those with excellent credit. That means no late payments on mortgages or other loans in the last 24 months. You should also have a debt ration of 36 or less, meaning your monthly debt payments should equal 36% or less of your monthly income.
With a few late payments, you may still get approved with a prime lender. But your rates will probably be a percent or more over the conventional rate. You may offset this with a large equity base or large cash assets.
Benefits Of Sub Prime Lenders
Getting approved with a sub prime lender is much easier than with a prime lender. Even if you have had a bankruptcy or foreclosure in the last few months, you can get a refi mortgage.
You can also avoid the cost of private mortgage insurance premiums with a sub prime mortgage. Prime lenders require insurance if you have less than 20% of equity in your home. Sub prime lenders also offer a wider variety of terms and loan options.
Finding The Best Refinance Mortgage For You
Even within each category of lender, there is a great range of rates. In order to find the lowest costing refinance package, you really need to request mortgage quotes from several lenders before making a decision.
There is also the trend for financial companies to deal with both types of lending. So don't rule out conventional lenders if you are looking for a sub prime mortgage.
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