Refinance Now, What Happens Later?

Many bad credit refinance mortgages carry prepayment penalties, some as long as five years. What you don't want is a loan that's fixed at a decent rate for two years but has a five-year prepayment penalty. You could end up with a very high rate for the remaining three years and no way out of it. Other loans start at a higher rate, and your rate can actually lower over time if you make your payments as agreed. All adjustable rate mortgages and loans with prepayment penalties have "riders" or additions to the standard loan documents, which state how your rate or penalty is determined, what you pay, and when. Read and understand these before signing--misunderstanding these riders can cost you, and no one but you is responsible for what you sign.

Loans come with piles of documents to read. The most important disclosures are the TIL form, the GFE, and any ARM or prepayment riders that show what your loan will do in the future. Read and understand these critical forms before agreeing to any bad credit refinance loan.