Florida Home Mortgage Refinancing with a Bad Credit Score: A Good Idea?

As interest rates adjust across the board, Florida home mortgage refinancing is taking place more and more around the state. For the most part, this is a good idea for those that have a solid credit rating.

But what if you’re score is below 600? Should you still try and lock in a different rate on your Florida mortgage loan?

A Florida home loan refinancing conundrum

Let’s paraphrase a letter to Don Taylor, a certified financial planner for bankrate.com, regarding this issue. A couple was in the last year of a 3/1 adjustable rate Florida home mortgage at a rate of 5.75 . The ARM was the best choice at the time because of this pair’s low credit score. At one point, they refinanced to a fixed-rate loan to do some home renovations. The original fixed-rate loan was an 8.75 percent FHA loan.

Now, however, the couple’s credit score isn’t must better, around 529, despite attempts to boost the rating and receive a better rate on its Florida home mortgage. Does this mean it’s bad time to refinance?

What to do with this Florida home loan

The best move, under these circumstances, is probably to remain in the existing mortgage until that credit score can be improved. Down the line, this loan could be refinanced at a better interest rate once the rating is better under control. According FICO, a credit score of 529 would currently qualify you for a fixed-rate mortgage at an interest rate a little over 11 percent.

For now, the aforementioned couple should figure out what the fully-indexed rate on its existing adjustable Florida home mortgage will be when the 5.75 percent rate ends. A loan might have caps on how much the interest rate can increase in a year and over the lifetime of the loan. If you can’t figure it out from the loan documents, talk to your lender.

To boost a sagging credit score, get current and stay current on your credit cards. Make every loan payment on time. Pay down the credit card balances the best you can. These steps will help you improve your credit history; because while Florida home mortgage rates are trending higher, especially ARMs, there are no bargains to be had in refinancing now when credit scores are this low.