Getting an Equity Mortgage with Bad Credit
A bad credit equity mortgage is easier to get than
a first mortgage for buying a home, since you are using
existing equity to borrow money. The lender’s
risk is significantly less, since if you don’t
pay, they can take your house.
However, despite the increased risk to you, there are
some advantages. An equity mortgage can be used as a
bill consolidator, and you can essentially “trade”
all of your high-interest loans, such as credit card
payments and car payments, for a single payment, which
is often significantly lower than the collective amount
of debts you will be paying off with the equity loan.
It can also be used to take care of home improvements,
or large unexpected debts. From a short-term perspective,
this can solve a lot of problems, since it allows you
to breathe a little easier and have a little extra money
to live on day-to-day. You will also get the advantage
of your interest payments being tax deductible, so long
as your combined mortgage does not exceed the value
of your home. It may even be the only way to avoid bankruptcy.
On the downside, your equity loan is often for a longer
period of time than the high-interest loans.
The easiest type of equity mortgage to get is the 100
percent equity mortgage, which allows you to borrow
against available equity, up to 100 percent of the value
of your home. For example, if you have a home worth
$100,000, and have an existing mortgage for $20,000,
you can easily quality to borrow $80,000, sometimes
even with minimal qualifying paperwork.
Other types of equity mortgage instruments may allow
you to borrow greater than the value of your home, although
the credit requirements for such a loan would be stricter
than one that borrows only against available equity.